The company completed the sale of its stake in the venture, TNK-BP, to Rosneft, the Russian state oil company, on Thursday for $12.48 billion in cash as well a 19.75 percent stake in Rosneft.
The $8 billion is roughly the equivalent of what BP originally paid for its 50 percent of TNK-BP in 2003. Over the last 10 years BP also received $19 billion in dividends from the venture, the company said.
BP said the remaining $4.48 billion from the stake sale would be used to reduce debt.
The buyback is about twice as large as analysts were expecting, said Andrew Whittock, an analyst at Liberum Capital in London, in a research note.
BP shares closed up 1.85 percent in London trading on Friday but remain about 30 percent below their level before the April 2010 Gulf of Mexico oil spill as investors worry about the company’s potential liabilities in the United States.
The company’s chief executive, Robert W. Dudley, who has led BP since October 2010, said in a statement that the buyback was expected to exceed what was required to offset the earnings-per-share dilution as a result of the TNK-BP sale.
He said the buyback also reflected the reduction in BP’s size after its $38 billion in divestments, excluding TNK-BP, over the last three years. BP has been selling assets as part of an effort to raise cash to pay for liabilities resulting from the Deepwater Horizon accident and oil spill in the Gulf of Mexico, which killed 11 people and spewed millions of barrels of crude oil.
At a news conference Thursday at BP’s headquarters in London, the two companies announced that Mr. Dudley would be nominated to join the Rosneft board. BP will also have an additional seat on the board.
Rosneft also bought the remaining 50 percent of TNK-BP on Thursday from a group of Russian oligarchs for $27.7 billion.
An ebullient Igor I. Sechin, Rosneft’s chief executive and an influential government official in Russia, said the two companies were already looking into what projects BP could collaborate on with Rosneft. “We are going to work definitely with BP offshore,” he said. “We are definitely going to avail ourselves of the experience and competencies of BP.”
Mr. Dudley said that Mr. Sechin had gone without sleep for about 40 hours in working to complete the transaction.
He said that the global oil and natural gas industry was changing and that new technologies gave Russia the opportunity to exploit “more expensive” methods to develop resources, like offshore oil, shale gas and tight oil, which is produced using techniques similar to those used to produce shale gas.
Mr. Dudley suggested that he was not troubled by the fact that Rosneft already had important strategic ventures in the Arctic with BP competitors — Exxon Mobil, Statoil and Eni. “We all applaud Rosneft’s progressive approach of strategic ties with international oil companies,” he said.
As a significant minority shareholder in Rosneft, BP will benefit from these ventures, Mr. Sechin said.
Article source: http://www.nytimes.com/2013/03/23/business/global/bp-to-buy-back-8-billion-in-shares.html?partner=rss&emc=rss