LONDON -- BP (LSE:BP) (NYSE:BP) this morning announced its intention to carry out a share repurchase program with a value of up to $8 billion, or £5.3 billion -- a bigger cash return than had been previously expected.
Yesterday, the oil Goliath completed the sale of its 50% stake in TNK-BP to Russian state oil company Rosneft for $12.5 billion, which now becomes the world's largest listed oil producer.
BP's original investment in 2003 saw around $8 billion in cash, shares and assets go into the formation of TNK-BP, and today's news backs its promise to return that money to shareholders. The remaining proceeds from the sale will be ploughed into the company in order to reduce its debt.
Chief executive Bob Dudley commented:
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 now to working closely with Rosneft and together developing opportunities to create value for both companies.
Buyback schemes are often undertaken with the intention to increase the value of shares, and BP's have seen a 12 pence, or 2.7%, increase in early trade to reach 461.45 pence.
The move follows further disposals by BP, such as the sale of its 50% non-operated stake in the Sean gas field in the North Sea to SSE, intended to help cash flow and maintain its ability to pay dividends. Indeed, during the first nine months of 2012, BP raised $5 billion from disposals, and currently yields 5%.
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