BP pays $10.5b for BHP shale assets to beef up US business
ACQUISITION IS BIG TURNING POINT FOR BP SINCE 2010 RIG DISASTER IN GULF OF MEXICO
BP Plc has agreed to buy US shale oil and gas assets from global miner BHP Billiton for $10.5 billion (Dh38.53 billion), expanding the British oil major’s footprint in oil-rich onshore basins in its biggest deal in nearly 20 years.
The acquisition marks a big turning point for BP since the Deepwater Horizon rig disaster in the Gulf of Mexico in 2010, for which the company is still paying off more than $65 billion in penalties and clean-up costs.
“This is a transformational acquisition for our [onshore US] business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio,” BP Chief Executive Bob Dudley said in a statement.
In a further sign of the upturn in its fortunes, BP said it would increase its quarterly dividend for the first time in nearly four years and announced a $6 billion share buy-back, to be partly funded by selling some upstream assets.
BP’s London-listed shares were trading 0.4 per cent higher at 1000 GMT, compared with a 0.6 per cent gain in the broader European energy index.
The sale ends a disastrous seven-year foray by BHP into shale on which the company effectively blew up $19 billion of shareholders’ funds. Investors led by US hedge fund Elliott Management have been pressing the company to jettison the onshore assets for the past 18 months. BHP put the business up for sale last August.
The sale price was better than the $8 billion to $10 billion that analysts had expected, and investors were pleased that BHP planned to return the proceeds to shareholders.
“It was the wrong environment to have bought the assets when they did but this is the right market to have sold them in,” said Craig Evans, co-portfolio manager of the Tribeca Global Natural Resources Fund.
Massive write downs
BHP first acquired shale assets in 2011 for more than $20 billion with the takeover of Petrohawk Energy and shale gas interests from Chesapeake Energy Corp at the peak of the oil boom.
It spent a further $20 billion developing the assets, but suffered as gas and oil prices collapsed, triggering massive write downs.
The world’s biggest miner said it would record a further one-off shale charge of about $2.8 billion post-tax in its 2018 financial year results.
The deal, BP’s biggest since it bought oil company Atlantic Richfield Co in 1999, will increase its US onshore oil and gas resources by 57 per cent.
BP will acquire BHP’s unit which holds the Eagle Ford, Haynesville and Permian assets for $10.5 billion, giving it “some of the best acreage in some of the best basins in the onshore US,” the company said.
It beat rivals including Royal Dutch Shell and Chevron Corp for the assets, which have combined production of 190,000 barrels of oil equivalent per day (boe/d) and 4.6 billion barrels of oil equivalent resources.
The deal would turn the onshore United States into “a heartland business in the company,” Bernard Looney, BP’s head of upstream, said in a call with analysts.
It will bring BP into the oilrich Permian basin in eastern Texas, where production has surged in recent years.