BP to return $8bn to shareholders after Rosneft deal

INVESTORS in BP are to share a bigger-than-expected $8 billion (£5.3bn) windfall after the oil giant completed its exit from a Russian joint venture.

The sale of the group’s 50 per cent stake in TNK-BP to Russian state-controlled oil company Rosneft gave it about $12.5bn in cash, of which $4.5bn will be used to reduce its debt burden

It has also built up a stake of almost 20 per cent in Rosneft, which will become the world’s largest listed oil company in terms of output, with production of about 4.5 million barrels a day.

The two companies are expected to embark on a series of joint projects, both in offshore Arctic exploration and the development of hard-to-reach oil reserves in western Siberia.

BP is to return $8bn to shareholders over the next 12 to 18 months. Canaccord Genuity analyst Gordon Gray said the scale of the share buy-back programme was “slightly higher” than the $5bn to $6bn return that the market had expected.

He added: “Our own published forecasts have buy-backs of $6bn this year and $2bn next year. This looks broadly consistent with BP’s statement.”

Chief executive Bob Dudley, who is set to join the Russian company’s board in June, said: “BP is moving on to the next phase of its business in Russia, becoming the largest private shareholder in Rosneft, Russia’s leading oil company. In the process we have also released cash, equivalent to at least six years of BP’s anticipated future dividends from TNK-BP. We look forward to working closely with Rosneft and together developing opportunities to create value for both companies.”

BP invested $8bn in cash, shares and assets when it formed the joint venture in 2003, and received some $19bn in dividends over the following decade.

Along with buying out BP’s stake in the joint venture, Rosneft has paid $27.73bn in cash for the 50 per cent of the business that was owned by AAR, a consortium of Russian oil tycoons.

Rosneft was created out of the former Soviet state oil and gas authority in 1993, and is about 75 per cent owned by the government. By gaining full control of TNK-BP, it will become the world’s largest publicly traded oil and gas producer, overtaking US rival ExxonMobil, which has a daily output of about 4.2 million barrels.

BP chairman Carl-Henric Svanberg said: “We expect our stake in Rosneft will generate long-term value for BP and its shareholders.

“But this buy-back programme should also allow our shareholders to see benefits in the near term from the value we have realised by reshaping our Russian business.”

The oil major has sold off $38bn of assets over the past two years to help pay for the damage of the 2010 Deepwater Horizon disaster in the Gulf of Mexico, which killed 11 workers.