British oil company BP announced an $8bn (£5.3bn) share buyback programme, acting swiftly on its promise to reward investors after it sold its stake in its Russian unit, TNK-BP.
BP, which completed the sale of the half-owned TNK-BP to Russian state oil firm Rosneft on Thursday, said the move, designed to increase the value of remaining shares, was an amount equivalent to the value of the company's original investment in TNK-BP in 2003.
The British company had already flagged that it planned to distribute to shareholders some of the $12.5bn it netted from the Russian sale, first announced last October.
Shares in BP climbed 1.8% to 457.5p in early trading, making the company one of the biggest risers in London's blue-chip index, a move analysts attributed to the bigger-than-expected cash return. The $8bn figure is about twice the minimum analysts had calculated BP would pay when it promised last October to at least offset any dilution to earnings per share as a result of the TNK-BP sale.
Santander analyst Jason Kenney said: "It's good news that they're returning that amount of cash, probably $2bn to $2.5bn more than what was anticipated."
BP confirmed that it expected the size of the proposed buyback would exceed the effect of the dilution. The return also reflects the huge reduction to BP's asset base from the $38bn worth of disposals carried out to help pay for the cost of the Gulf of Mexico oil spill in 2010, it said.
BP's chairman, Carl-Henric Svanberg, said: "This buyback programme should allow our shareholders to see benefits in the near-term from the value we have realised by reshaping our Russian business."
The deal with Rosneft, worth $55bn in total and making it the biggest in Russia's corporate history, gives BP a near 20% stake in Rosneft.
The $4.5bn balance remaining from the Russian sale after the buyback will be used to reduce group debt, BP said.
BP is currently in court in New Orleans over the Gulf of Mexico oil spill, which happened when the Deepwater Horizon rig exploded and sank, killing 11 men.
The disaster, the worst in the United States's offshore history, prompted BP to cut its dividend in 2010, before resuming payments in 2011.
BP said it expects the buyback programme to take 12 to 18 months to complete./The Guardian/