Posted on 21 Jul 2010
BP has announced plans to raise an estimated $8.7 billion from asset sales, bringing the embattled oil group close to its initial target of raising $10 billion from disposals to help pay for the cost of its huge oil spill in the Gulf of Mexico.
Most of the cash will come from a $7bn deal with Apache, the US independent oil and gas company, which is buying onshore gas assets in the US, Canada and Egypt.
BP has also said it will sell most of its assets in Vietnam and Pakistan, which are valued by analysts at about $1.7bn as it accelerates divestments in an attempt to allay concerns over its financial health.
Apache had been in talks over taking a stake in the giant Prudhoe Bay oil field in Alaska, in production for BP since 1977, but the two companies have not yet been able to agree a price.
BP is likely to announce further disposals, but its ability to reach a significant deal so soon, just over a month after the disposal plan was announced, will ease the pressure for it to make further sales quickly.
Apache is buying gas fields in Texas and New Mexico for $3.1bn, in western Canada for $3.25bn, and in Egypt’s Western Desert for $650m.
The assets in total represent about 2 per cent of BP’s reserves, and are being sold for about 6.4 per cent of its market capitalization last night. In total, they produce about 331m cubic feet of gas per day, and account for about 2.3 per cent of BP’s worldwide production.
$5bn of the purchase price will be paid next week, on July 30.
Steven Farris, Apache’s chief executive, said in a statement: “This is a rare opportunity to acquire legacy positions from a major oil company… We seldom have an opportunity like this in one of our core areas, let alone three.”
Apache is a specialist in extending the lives of mature fields, as it has done very successfully with the Forties field in the North Sea that it bought from BP in 2003.
BP was advised by Standard Chartered; Apache by Goldman Sachs, BofA Merrill Lynch, Citi and JPMorgan.
Separately, BP has told staff and government officials in Pakistan and Vietnam that it intends to sell all its assets except its Castrol lubricants business.
In Pakistan, where it produces 173m cu ft of gas per day, BP intends to sell onshore and offshore oil and gas fields, some of which are already producing and others where BP holds the right to explore.
In Vietnam, where BP produces 63m cu ft of gas per day, the company wants to sell its Lan Tay and Lan Do fields and the related Nam Con Son and Phu My 3 pipelines. In total, the sales from both countries represent 2.7 per cent of BP’s natural gas production of 8.5bn cu ft per day.
Jason Kenney, analyst at ING, said: “This is an opportunity to clear out the closet. BP can get to $10bn quite easily,” he said, noting that the company was merely accelerating the divestments of non-core assets it would have otherwise sold over the next 3-5 years.
BP has also held discussions over selling its 60 per cent stake in Pan American Energy of Argentina worth about $9bn, as well as fields in Colombia and Venezuela.
Despite political opposition by some US lawmakers, BP is desperate to maintain its position in the deep waters of the Gulf of Mexico, one of its most important regions.
A senior BP officer told the FT last week that the company could “easily” raise $20bn from disposals, twice its original target of $10bn within the next 11 months.
Achieving this figure would negate the need for BP to raise funds by issuing new equity, he said.
Tony Hayward, BP’s chief executive, has told BP employees that the company had to show it had the cash to pay for its liabilities by the time it presents its second quarter earnings on July 27.