BP announced today that it has entered into several agreements to sell upstream assets in the US, Canada and Egypt to Apache Corporation. The deals, together worth a total of US$7 billion, comprise BP’s Permian Basin assets in Texas and south-east New Mexico, US; its Western Canadian upstream gas assets; and the Western Desert business concessions and East Badr El-din exploration concession in Egypt.
The decision to make these divestments follows the announcement made by BP last month that it was increasing its target for divestments to $10 billion. The proceeds of the sales will be used by BP to increase the cash available to the group.
The announcement follows news of the British oil giant’s sale of it’s gas fields and pipeline interests in Vietnam and oil and gas exploration and production assets in Pakistan on Tuesday.
The aggregate proceeds for the deals is $7 billion, subject to customary post-completion price adjustments, such proceeds to be paid in cash. Each sale will take place through a separate agreement between BP and Apache, and none of the sales will be conditional on completion of any of the other sales occurring.
Apache is due to pay BP a cash deposit of $5 billion in aggregate on 30 July 2010. The deposit is split $3.25bn for Canada, $1.5bn for Permian and $0.25bn for Egypt.
BP said that its commitments to its Gulf of Mexico activities have resulted in a number of changes to the Group’s financial plans. These include suspension of 1st, 2nd and 3rd quarter 2010 interim dividends in 2010, a significant reduction in capital expenditure as well as acceleration in its divestment programme, focusing mainly on non-core upstream assets.
BP chairman, Carl-Henric Svanberg, said: “Over the last two months the Board has considered BP’s options for generating the cash necessary to meet the obligations likely to arise from the Gulf of Mexico oil spill. BP has an extremely strong asset base which is diversified geographically as well as by asset class. The Board believes that there are opportunities to divest assets which are strategically more valuable to other parties than they are to BP. Today’s announcement is the first such transaction and meets the value and strategic criteria of both parties.”
BP group chief executive Tony Hayward said: “We have achieved an excellent price for a set of properties that are worth more to others than to BP. This is a good first step which underlines our ability and determination to get maximum value for everything we sell.”
“This transaction provides a sustainable growth platform for Apache’s onshore North America operations as well as strategic infrastructure and exploration potential in Egypt,” said G. Steven Farris, Apache’s chairman and CEO. “We appreciate the opportunity and the professional manner in which BP employees conducted themselves. Their cooperation was a key ingredient for this transaction to come together.”
Sale of Western Desert business concessions and East Badr El-din exploration concession in Egypt
The total consideration payable for the Western Desert business concessions and East Badr El-din exploration concession is $0.65 billion, subject to customary post-completion price adjustments.
In Egypt, the net production of the assets being sold is approximately 6,016 barrels of oil per day and 11 million cubic feet of gas per day. Approximately 20 million barrels of oil equivalent of net proved reserves and 55 million barrels of oil equivalent of net resources are associated with these assets. The sale includes the East Badr El-din concession where BP has an exploration licence with a 100 per cent interest and BP’s interests in the Western Desert business concessions.
Sale of Permian Basin assets in Texas and south-east New Mexico
The total consideration payable for the Permian basin assets is US$3.10 billion, subject to customary post-completion price adjustments.
The10 Permian Basin fields are: Block 31, Empire/Yeso, SELea, Brown Bassett, Block16/Coy Waha, Spraberry, Wilshire, North Misc, Pegasus, Delaware Penn in Texas and south-east New Mexico. Included in the sale of such interests are the two BP-operated gas processing plants at Block 31 and Crane and non-operated interests in the Terrell gas processing facility. Net production from these assets are approximately 15,100 barrels of liquids per day and 80 million cubic feet of gas per day. Approximately 126 million barrels of oil equivalent of net proved reserves and 148 million barrels of oil equivalent of net resources are associated with these assets.
Sale of Western Canadian upstream gas assets
The total consideration payable for the Western Canadian gas assets is $3.25 billion, subject to customary post-completion price adjustments. Approximately 214 million barrels oil equivalent of net proved reserves and 1,368 million barrels oil equivalent of net resources are associated with these assets.
The upstream Western Canadian gas business has net production of 240 million cu ft of gas per day and 6,500 barrels of liquids per day. The producing assets that are included, both operated and non operated, are managed by the following Operating Areas: Noel, Ojay, Chinchaga, Wapiti, Fox Creek, Edson, Marten Hills, South West and St. Lina. Also included is the proposed Mist Mountain coal bed methane project.
