British oil giant BP (NYSE: BP ) is returning up to $8 billion to its shareholders after making some significant changes to its ownership interests in Russia.
In a statement Friday, BP said it will use $8 billion of the cash it raised from this week's Russian restructuring for share buybacks of its own stock. According to the company, this $8 billion is equivalent to the value of its entire original investment in TNK-BP.
On Thursday, Russian oil company Rosneft finalized two purchases totaling $44.3 billion that give it ownership of TNK-BP:
- Buying AAR's (Alfa Group, Access Industries, and Renova Group's) 50% interest in the TNK-BP joint venture for $27.7 billion.
- Buying BP's 50% stake in TNK-BP for $16.6 billion (cash) and 12.84% of its own shares.
Separately, BP paid $4.9 billion of the cash it received from Rosneft to buy a further 5.66% stake in Rosneft from shareholder OFSC Rosneftegaz.
The net effect of these transactions was to give Rosneft 100% control over the TNK-BP oil company. Meanwhile, BP traded its half-interest in TNK-BP for an 18.5% stake in Rosneft and $12.5 billion in cash. Combined with the 1.25% stake it already owned in Rosneft, BP's stake in Russia's biggest oil company now amounts to 19.75%. Plus, it has an extra $4.5 billion to play with. BP said it would use the additional cash consideration to reduce debt.
BP said it invested about $8 billion in cash, shares, and assets in the formation of TNK-BP in 2003 and, over the following decade, it received a total of $19 billion in dividends from the joint venture.
"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," BP CEO Bob Dudley was quoted as saying.