F. Carter Smith for The New York TimesA BP oil and natural gas platform in the Gulf of Mexico’s Horn Mountain oil field in 2002.
9:53 a.m. | Updated
LONDON — BP agreed on Monday to sell stakes in a group of oil fields in the Gulf of Mexico to the Plains Exploration and Production Company of Houston for about $5.6 billion.
The announcement comes as Robert W. Dudley, chief executive of BP, is raising money to pay cleanup costs and potential fines resulting from a huge oil spill in the Gulf of Mexico in 2010.
BP has taken charges of $38 billion for the spill, and could face substantially higher costs if it is found guilty of gross negligence in causing the disaster, which killed 11 people on the Deepwater Horizon rig and led to extensive cleanup efforts.
Mr. Dudley has been refocusing BP on high-risk, high-return frontier exploration and production, including deepwater fields. The company has said it is in talks to sell its 50 percent stake in its Russian affiliate, TNK-BP, which it considers a low-growth property.
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Documents: The news releaseThe announced deal — of older, smaller assets in the Gulf of Mexico — remains true to the effort to sell mature fields. Plains Exploration, a midsize oil company with a market capitalization of about $5.2 billion, has operations in California, the Gulf of Mexico and Texas.
Stuart Joyner, an analyst at Investec in London, called the price reasonable and said it would “lower net debt by 20 percent and/or pay the whole of this year’s dividend, so it is a sizable sum.”
BP, however, could regret selling the fields if oil prices rise. Gulf of Mexico oil is among the most profitable in BP’s portfolio because of relatively low taxes and exploration and development costs, BP executives say. Other companies like the Apache Corporation have wound up profiting handsomely from past BP sales.
Shares of Plains Exploration fell 7.6 percent in early trading in New York on Monday, while BP rose 0.6 percent in afternoon trading in London.
The company insists the sale is not a sign of a reduced commitment to the Gulf of Mexico. “While these assets no longer fit our business strategy, the Gulf of Mexico remains a key part of BP’s global exploration and production portfolio, and we intend to continue investing at least $4 billion there annually over the next decade,” Mr. Dudley said in a statement.
In May, BP said it was marketing its interests in the group of fields it is selling to Plains Exploration, including Horn Mountain, Holstein, Diana Hoover, Ram Powell and Marlin.
These fields produce about 59,000 barrels a day, according to the companies. The sale represents about a quarter of BP’s gulf production of 240,000 barrels a day in the three months ended June 30. BP had production of more than 400,000 barrels a day in the Gulf of Mexico before the April 2010 explosion at its Macondo well, which halted drilling and caused its output to fall rapidly.
BP has said it wants to focus on four major platforms that it operates — Thunder Horse, Atlantis, Mad Dog and Na Kika — as well as three platforms run by other companies. BP says it will have eight drilling rigs working in the Gulf of Mexico by the end of the year, the most ever for the company.
The deal is expected to close by the end of the year. With this sale, BP has now reached agreements to sell oil fields and other properties with a value of $32 billion since the end of 2010, including an agreement last month to sell its Carson oil refinery in California and 800 gasoline stations to Tesoro for $2.5 billion.
Excluding the TNK-BP joint venture, the company aims to sell $38 billion in assets by the end of 2013.
BP’s stock is likely to remain under pressure until the penalties imposed by the United States government for the gulf spill are resolved and it completes the sale of its Russian affiliate.
The TNK-BP operations are not well-regarded by markets because of uneasiness about the political climate in Russia and BP’s frequent fights with its Russian partners. A sale could bring $20 billion or more.
Fines for the gulf oil spill could exceed $20 billion. BP continues to say that it does not believe it was guilty of gross negligence. BP wants to settle the matter before the case comes to trial in January.
Article source: http://dealbook.nytimes.com/2012/09/10/bp-said-to-be-in-talks-to-sell-gulf-of-mexico-assets-for-6-billion/?partner=rss&emc=rss
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