| BP in $7bn deal with Devon |
|
11/03/2010 13:31 (702 Day 04:49 minutes ago) | |||||
The FINANCIAL -- BP on March 11 announced a transaction that will deliver a material exploration position in the deepwater offshore Brazil and significantly enhance its position in core strategic areas.
According to BP, in a broad-ranging deal, BP will pay Devon Energy $7.0 billion in cash for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico. These include interests in ten exploration blocks in Brazil, including seven in the prolific Campos basin; a major portfolio of deepwater exploration acreage and prospects in the US Gulf of Mexico; and an interest in the BP-operated Azeri-Chirag-Gunashli (ACG) development in the Caspian Sea, Azerbaijan.
In addition, BP will sell to Devon Energy a 50 per cent stake in BP's Kirby oil sands interests in Alberta, Canada, for $500 million, as BP reports. The parties have agreed to form a 50/50 joint venture, operated by Devon, to pursue the development of the interest. Devon will commit to fund an additional $150 million of capital costs on BP’s behalf. Completion of certain transfers will be subject to regulatory approvals and other third party consents.
The deal gives Europe's second-largest oil company by market value reserves and highly prospective exploration which will help it meet its goal of growing production at 1 to 2 percent per annum in the next decade, according to Reuters. Analysts said it was hard to estimate whether BP was paying a good price for the assets as they included fields whose reserves are unknown as they are still being explored.
BP shares were unmoved by the deal, falling 0.7 percent against a 0.4 percent drop in the STOXX Europe 600 Oil and Gas index .SXEP at 0837 GMT (3:37 a.m. ET), according to the same source. The deal also gives BP the entry into Brazil which Chief Executive Tony Hayward has long eyed.
"Through our entry into Brazil, BP will add a major position in another attractive deepwater basin," said Andy Inglis, BP's head of exploration and production, BBC reports. "It further underlines our global position as the leading deepwater international oil company." Deepwater generally refers to oil fields in water 300 metres or deeper.
Devon’s assets may add 40,000 barrels a day starting next year based on their current production, with “huge potential” for exploration, BP spokesman David Nicholas said today, according to Bloomberg. “This strategic opportunity fits well with BP’s operating strengths and key interests around the world,” said Hayward. “As well as giving us a broad portfolio of assets in the exciting Brazilian deepwater, it will strengthen our position in the Gulf of Mexico, enhance our interests in Azerbaijan and enable us to progress the development of Canadian assets.” on the company’s asset sale program.
Devon, based in Oklahoma City, said Nov. 16 it plans to sell all its offshore and non-North American assets to focus on U.S. and Canada drilling, as the same source reports.
BP is currently undertaking a major investment programme at its Whiting, Indiana, refinery, significantly increasing its capacity to process heavy crudes such as Canadian heavy oil, BP reports. The Whiting upgrade is planned to come on-stream in 2012.
"Devon is an experienced operator in the Canadian oil sands with a proven track record of in situ development and production," said Inglis, according to the same source. "We expect this transaction will accelerate the development of the Kirby assets and, through the associated crude off-take agreement, provide a secure source of Canadian heavy oil for our advantaged Whiting refinery." On completion of the transaction, Devon’s employees in Brazil are expected to join BP.
|
|
|
