BP Plc
(
BP
) has closed the previously announced divestiture agreement with a
subsidiary of
Plains All American Pipeline LP
(
PAA
) − Plains Midstream Canada ULC − related to its Canadian natural
gas liquids (NGLs) as well as its liquefied petroleum gas (LPG)
business. The transaction was valued at $1.67 billion. The concord,
which mainly aims to streamline the U.K. major's portfolio, was
announced last year in December.
The sale of the Canadian business comprises NGLs extracting
unit, along with pipelines and storage facilities. As a whole, the
Canadian operation, with a processing capacity of 8.3 billion cubic
feet of gas a day, holds about 4,000 kilometers (2,480 miles) of
pipeline systems. The business mainly involves the transportation,
extraction and processing of NGLs across Canada as well as in the
Great Lakes region of the U.S.
The latest pact is a part of BP's extensive asset divestiture
program, which will help it overcome liquidity concerns for all
spill-related liabilities. With the completion of the latest deal,
BP's residual business in Canada will be under its Canadian
affiliate − BP Canada Energy Group ULC. The business comprises
integrated supply and trading business, oil sands, and existing
Arctic significant discovery licenses. The company's Beaufort Sea
exploration licenses will continue to be under BP Exploration
Operating Company Limited.
Recently, BP inked an asset disposal agreement with Perenco UK
Ltd to sell its share in its southern gas assets in the UK North
Sea as a part of BP's $38 billion asset divestiture plan as well as
to develop a more focused North Sea business. 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.
We believe BP, U.K.'s second-largest oil company after
Royal Dutch Shell Plc
(
RDS.A
) is offloading its non-core properties while creating a portfolio
with potentially higher margin base. Since the catastrophic Macondo
accident, BP has tried to re-establish its position and aptitude to
bring continued returns for shareholders.
The company has expended to a large extent this year in an
attempt to rebuild its portfolio in the wake of the Gulf of Mexico
(GoM) disaster. We believe this will eventually turn out to be
beneficial for the British giant, whose focus on a string of
upstream activities in high margin areas like the GoM, Angola, the
North Sea, Brazil, Australia and India bodes well for its future
growth.
We maintain our long-term Neutral recommendation for BP, which
retains a Zacks #3 Rank (short-term Hold rating).
BP PLC (
BP
): Free Stock Analysis Report
PLAINS ALL AMER (
PAA
): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis
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