Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

BP pays $10.5 billion for BHP shale assets to beef up U.S. business

Stock MarketsJul 27, 2018 06:06AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Mackenzie is silhouetted against a screen projecting the company's logo at a round table meeting with journalists in Tokyo

By Sonali Paul and Ron Bousso

MELBOURNE/LONDON (Reuters) - BP Plc (L:BP) has agreed to buy U.S. shale oil and gas assets from global miner BHP Billiton (L:BLT) (AX:BHP) for $10.5 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 U.S.) 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 buyback, to be partly funded by selling some upstream assets.

BP's London-listed shares were trading 0.4 percent higher at 1000 GMT, compared with a 0.6 percent gain in the broader European energy index (SXEP).

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 U.S. 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.

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 (NYSE:CHK) 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 writedowns.

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.

U.S. BOOST FOR BP

The deal, BP's biggest since it bought oil company Atlantic Richfield Co in 1999, will increase its U.S. onshore oil and gas resources by 57 percent.

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 U.S.," the company said.

It beat rivals including Royal Dutch Shell (L:RDSa) and Chevron Corp (N:CVX) 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 oil-rich Permian basin in eastern Texas, where production has surged in recent years. With it, BP's onshore oil production will jump from 10,000 barrels per day to 200,000 bpd by the mid-2020s, Looney said.

BP said the transaction would boost its earnings and cash flow per share and it would still be able to maintain its gearing within a 20-30 percent range.

The company also said it would increase its quarterly dividend by 2.5 percent to 10.25 cents a share, the first rise in 15 quarters.

Meanwhile, a unit of Merit Energy Company will buy BHP Billiton Petroleum (Arkansas) Inc and the Fayetteville assets, for $0.3 billion.

Tribeca's Evans welcomed the clean exit for cash, rather than asset swaps which BHP had flagged as a possibility.

"It leaves the company good scope to focus on their far better offshore oil business," he said.

BHP Chief Executive Andrew Mackenzie said the company had delivered on its promise to get value for its shale assets, while the sale was consistent with a long-term plan to simplify and strengthen its portfolio.

BHP (AX:BHP) shares rose 2.3 percent after the announcement, outperforming the broader market (AXJO) and rival Rio Tinto (AX:RIO) (L:RIO).

BP said it would pay the $10.5 billion in installments over six months from the date of completion, with $5.25 billion of the consideration to be raised through the sale of new shares.

An Elliott spokesman declined to comment.

BP pays $10.5 billion for BHP shale assets to beef up U.S. business
 

Related Articles

Exclusive-JPMorgan faces oil bribery probe in Brazil
Exclusive-JPMorgan faces oil bribery probe in Brazil By Reuters - Sep 22, 2021

By Gram Slattery RIO DE JANEIRO (Reuters) - Brazilian authorities are investigating whether JPMorgan Chase & Co (NYSE:JPM) played a role in an alleged bribery and money laundering...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email