BP ap­proaches en­ergy com­pa­nies over po­ten­tial $1b N Sea sell-off

The Pak Banker - - Company& -

NEW YORK: BP has sounded out a se­ries of UK­fo­cused en­ergy com­pa­nies about a po­ten­tial sell-off of North Sea as­sets, Tele­graph re­ported

Ac­cord­ing to the news­pa­per, the em­bat­tled oil and gas group is un­der­stood to have gone to util­i­ties and oil com­pa­nies to gauge their in­ter­est in the col­lec­tion of as­sets worth in the re­gion of $1bn.

Ac­cord­ing to com­pa­nies and bankers, BP has ap­proached par­ties on a "pre­tender" ba­sis - be­fore any of­fi­cial auc­tion - to gauge the level of in­ter­est in a port­fo­lio of non-core field, the paper added.

"We've been hav­ing a look at some gas as­sets, but it's very early on," said an ex­ec­u­tive at one en­ergy com­pany. "It's about see­ing whether they'd be a good fit."

In the wake of the Deep­wa­ter Hori­zon oil spill, BP has pledged to sell of $30bn of as­sets to fund the clean-up and com­pen­sa­tion for vic­tims.

The com­pany has raised $21bn of the $30bn in planned sales, which it said it would achieve be­fore the end of the year.

In July, BP strongly de­nied that it has any plans to exit the North Sea en­tirely, where it has around $20bn of fields and a cap­i­tal ex­pen­di­ture pro­gramme of $3bn.

How­ever, spec­u­la­tion has since been mount­ing about an auc­tion of low-mar­gin fields, in com­mon with other oil ma­jors.

ExxonMo­bil is un­der­stood to be look­ing to sell a $2bn pack­age of North Sea as­sets as the de­plet­ing fields are no longer so at­trac­tive to big com­pa­nies that need to fund high div­i­dends.

Com­pa­nies who have said they are look­ing at the North Sea for po­ten­tial ac­qui­si­tions in­clude Petro­fac spin-off EnQuest, Dan­ish gi­ant Maersk and smaller pro­duc­tion play­ers like Ithaca En­ergy, plus Bri­tish util­i­ties like Cen­trica and Scot­tish & South­ern.

The ma­tu­rity of Bri­tain's North Sea oil fields makes their growth prospects a lot less ap­peal­ing to BP which has been chas­ing higher-mar­gin oil ex­plo­ration in ar­eas like Brazil and the Gulf of Mex­ico.

Util­ity com­pa­nies are less concerned with high re­turn in the short term than with long term en­ergy se­cu­rity, while oil and gas in­de­pen­dents are bet­ter placed to milk as­sets for the du­ra­tion of their life­time.

"The North Sea con­tains more than 20bn bar­rels of oil and gas equiv­a­lent, but re­quires enor­mous amounts of in­vest­ment," said Jim Han­non, of Han­non West­wood, the North Sea en­ergy ad­vi­sory com­pany.

"Even the next phase of just 15pc of this fig­ure from the higher pri­or­ity dis­cov­er­ies will need more than $30bn in the next five years," Mr Han­non added. "The change of own­er­ship through sales of ex­ist­ing pro­duc­tion and po­ten­tial devel­op­ment hubs to new en­trant or emerg­ing com­pa­nies is one im­por­tant in­gre­di­ent in se­cur­ing these devel­op­ment funds."

BP has al­ready off­loaded its 60pc stake in Ar­gentina's oil and gas pro­ducer Pan Amer­i­can En­ergy with a $7.1bn price tag and sold a port­fo­lio of North Amer­i­can and Egyp­tian as­sets to Apache Cor­po­ra­tion for $10bn.

BP, whose shares closed up 3pc at 450p on Mon­day, de­clined to com­ment on the sell-off.

A spokesman said: "As we have pre­vi­ously in­di­cated, the North Sea re­mains a hugely im­por­tant part of BP glob­ally, and we in­tend to sus­tain a sig­nif­i­cant busi­ness here for the long term. The com­pany has a multi-bil­lion pound in­vest­ment pro­gramme over the next few years, cen­tred on four ma­jor new field devel­op­ment projects in the UK and two in Nor­way."

Sep­a­rately, Pak­istan's biggest listed firm, the Oil and Gas Devel­op­ment Com­pany (OGDCL), said it plans to bid for BP's gas as­sets in the Asian coun­try with Pak­istan Petroleum Ltd (PPL).

An OGDCL spokesman said a bid would be sub­mit­ted im­mi­nently but did not give de­tails of the pric­ing. The com­pany is al­ready a part­ner of BP in Pak­istan. An­a­lysts es­ti­mate the fields, pre­vi­ously linked to Premier Oil and Mubadala, the Abu Dhabi sov­er­eign wealth fund, are worth around $500m.

More­over, BP shares were the big win­ner among the in­te­grated oil ma­jors on Mon­day, gain­ing more than 3% in trad­ing, al­beit on av­er­age vol­ume. Con­tent on this page re­quires a newer ver­sion of Adobe Flash Player. BP was the only com­pany among the global oil ma­jors with a gain above 1% on the first day of the week.

The price of crude oil con­tin­ued to flirt with the $90 mark --though it wasn't mov­ing any higher on Mon­day -and the en­ergy sec­tor's one­day gain was ahead of the broad mar­ket, which was more or less flat af­ter a los­ing morn­ing. Oil sec­tor com­pa­nies have been reach­ing an­nual highs as the price of crude has climbed higher. Last Fri­day, sev­eral oil sec­tor com­pa­nies, in­clud­ing Hal­libur­ton(HAL), Bak­erHughes(BHI) and Schlumberger(SLB) fin­ished the week at an­nual high share prices. Among BP's in­te­grated oil peers, Exxon Mo­bil(XOM) and Cono­coPhillips(COP) have gained 16% over the past three months. -PB News

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