) has inked an asset disposal agreement with Perenco UK Ltd to sell
its share in its southern gas assets (
) in the UK North Sea. The deal is a part of BP's asset divestiture
plan to help pay off the charges ensuing the disastrous Gulf of
Mexico (GoM) incident and to develop a more focused North Sea
The divestiture includes the Cleeton stream fields, the West
Sole stream fields, the Amethyst field and the Dimlington terminal
that together produce 25,000 barrels of oil equivalent a day. The
$400 million all in-cash transaction is expected to be completed
before the end of 2012 and is subject to customary closing
conditions. Perenco has already paid $100 million, while the
balance will be paid upon the completion of the contract.
The latest deal is part of BP's venture to develop a more
focused North Sea business in the country as well as in Norway. The
U.K.'s second-largest oil company after
Royal Dutch Shell Plc
) − BP − plans to spend approximately 10 billion pounds over the
next five years in the North Sea region marking the highest annual
investment into UK's offshore industry made by the company in its
entire history. The company already got the approval last year for
the Clair Ridge project development in the west of Scotland's
Shetland Islands and remains busy with a multi-billion pound
program, with four major field development projects in the UK and
two more in Norway.
Moreover, the sale is also part of BP's ongoing asset
divestiture program, which will help it overcome liquidity concerns
for all spill-related liabilities. In October last year, BP
announced its intentions to expand its $35 billion asset-sale
program by another $15 billion before 2014. However, the collapse
of its deal to sell its stake in Argentina's Pan American Energy
late last year forced the company to revise its program to $38
billion. BP has already disposed worldwide assets worth almost $23
billion, including those to be sold to Perenco.
We believe the company is offloading its non-core upstream
properties while creating a portfolio with potentially stronger
growth from a smaller base. Additionally, BP's focus on a string of
upstream activities in high margin areas like the Gulf of Mexico,
Angola, the North Sea, Brazil, Australia and India bodes well for
its future growth.
Hence, we maintain our long-term Neutral recommendation for BP,
which holds a Zacks #3 Rank (short-term Hold rating).
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