British energy giant BP plc (BP: Quote,BP.L) agreed Monday to sell certain of its assets and interests in the deep water U.S. Gulf of Mexico to Plains Exploration and Production Co. (PXP: Quote) for a total of $5.55 billion in cash. The deal is expected to close by the end of 2012.
BP is in the process of divesting non-core assets in order to fund the cleanup and other costs related to the 2010 Gulf of Mexico oil well disaster, which caused the worst oil spill in history.
Houston-based independent oil explorer Plains Exploration said it intends to fund the acquisition through debt financing provided by a consortium of banks led by J.P. Morgan Securities LLC., also including Bank of America, N.A., Barclays Bank PLC, and Citigroup Global Markets, Inc.
"While these assets no longer fit our business strategy, the Gulf of Mexico remains a key part of BP's global exploration and production portfolio and we intend to continue investing at least $4 billion there annually over the next decade," said Bob Dudley, BP group chief executive.
BP had earlier in May announced its intention to divest the assets and position in its Gulf of Mexico portfolio for long-term growth.
BP is selling its interests in three BP-operated assets and two non-operated assets. The BP-operated assets include the Marlin hub, including the Marlin, Dorado and King fields (BP working interest 100 percent); Horn Mountain (BP 100 percent) and Holstein Field (BP 50 percent).
Meanwhile, Plains Exploration announced separately that it will acquire the other 50 percent working interest in the Holstein Field from Shell Offshore for $560 million.
The two BP non-operated assets include Ram Powell operated by Shell Offshore, Inc. (BP, 31 percent) and Diana Hoover operated by ExxonMobil Corp. (XOM) (BP, 33.33 percent).
The divested assets have been producing an estimated 59,500 barrels of oil equivalent net per day of which nearly 84 percent is oil and natural gas liquids.
"This sale, as with previous divestments, is consistent with our strategy of playing to our strengths as a company and positioning us for long-term growth. In the Gulf of Mexico that means focusing future investments on our strong set of producing assets and promising exploration prospects," Dudley added.
The company is selling assets and interests as it seeks to reach its asset sales program target of $45 billion by the end of 2013. BP had raised this target by another $15 billion from $30 billion while announcing a strong third-quarter profit for BP in October.
Including the current deal, BP has now agreed to sell assets totaling more than $32 billion since the beginning of 2010. BP said it now expects to divest assets with a total value of $38 billion between 2010 and 2013.
Dudley noted that "This deal further demonstrates the value we have been able to unlock through the targeted divestment of high-quality assets that sit outside the heart of our strategy".
The company went on an asset sale spree in the wake of Deepwater Horizon disaster in 2010. The well explosion at the BP-leased Deepwater Horizon rig on April 20, 2010 had killed eleven and seriously injured many of the 126 workers on the rig, which eventually sank in about 5,000 feet of water. It caused the biggest environmental disaster in U.S. history.
BP closed Friday's regular trading session at $41.93, up $0.75 or 1.82% on a volume of 5.60 million shares, and PXP closed at $40.33, up $0.57 or 1.43% on a volume of 2.16 million shares.
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by RTT Staff Writer
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