TNK-BP Disposal May Put BP's Dividend in the Spotlight

LONDON -- The shares of BP (LSE: BP.L  ) (NYSE: BP  ) fell 3 pence to 448 pence in early trading this morning after the FTSE 100 oil group confirmed it was in "advanced discussions" to sell its 50% stake in TNK-BP to Rosneft.

Weekend reports suggested BP's board had already agreed a $27 billion deal to sell the company's half of the Russian joint venture.

According to Reuters and the Financial Times, BP is expected to receive about $13 billion in cash alongside a 19% stake in Rosneft, which would be worth about $14 billion at the Russian oil group's current share price.

TNK-BP, currently Russia's third-largest oil producer, was established in 2003 when BP merged its Russian assets with those of Alfa Access Renova, a consortium representing the oil interests of various Russian tycoons. Rosneft, which is majority-owned by the Russian government, is seeking to acquire AAR's half of TNK-BP as well.

Announcements confirming the future of TNK-BP could be made later this week, according to reports today.

BP's relationship with AAR has not been easy, with current BP boss Bob Dudley, then chief executive of TNK-BP, claiming to have faced "sustainedharassment" from the Russian authorities during 2008. In addition, an attempt by BP to sell its TNK-BP stake last year was blocked by AAR.

BP's proposed TNK-BP sale follows numerous other disposal announcements from the FTSE 100 group that, since the start of 2010, have totaled some $35 billion.

The sale of the TNK-BP stake could put BP's cash flow and dividend in the spotlight. During 2011, BP's finances were boosted by a $3.7 billion dividend from TNK-BP, and the FTSE major collected a further $14 billion from the joint venture between 2004 and 2010.

In contrast, a 19% stake in Rosneft would deliver a dividend of about $500 million a year, based on the Kremlin-backed firm's current 7.53 ruble per share payout.

BP's dividend currently runs at $0.08 per share per quarter, which will cost BP about $6 billion this year.

Right now, BP offers a 4.5% dividend yield and is just one of a number of FTSE large caps that offers an income well ahead of what you can expect to receive from a standard savings account.

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Maynard Paton does not own any share mentioned in this article. The Motley Fool has a disclosure policy.
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  • Report this Comment On October 22, 2012, at 5:58 PM, pmz123 wrote:

    Even without TNK-BP, BP will generate over $15B in cash flow which is more than adequate to continue the dividend.

  • Report this Comment On October 23, 2012, at 2:42 AM, InspectorJavert wrote:

    Where do you get $.08/shareper quarter? How about $.48 totaling up to $1.92/year/share. Get the facts straight please.

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