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BP Plc ( BP - Analyst Report ) has inked an asset sale agreement with the Japanese trading company Mitsui & Co. for its minority shares in two North Sea fields. This $280 million, all in-cash transaction marks the British oil giant’s effort to concentrate more on larger scale projects in the region.
BP — U.K.’s second largest oil company by market value following Royal Dutch Shell Plc ( RDS.A - Analyst Report ) — will divest a 13.3% stake in Alba field and 8.97% stake in Britannia filed. The fields produce around 7,000 barrels equivalent of oil and gas per day.
The deal, which is scheduled to close in the third quarter of this year, allows BP to refocus on the core areas of its North Sea portfolio comprising six key projects in the Norwegian and British parts.
Earlier this year, the company entered into an asset disposal agreement with Perenco UK Ltd to sell its share in its southern gas assets in the UK 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, pending subject to customary closing conditions. Perenco has already paid $100 million, and the balance will be paid upon the completion of the contract.
The latest divestiture follows an accord to offload its operations in Wyoming to LINN Energy, LLC ( LINE - Snapshot Report ) in a $1 billion all-cash deal to help pay for the catastrophic 2010 Gulf of Mexico (GoM) oil spill. The sale comprises more than 12,500 acres in the Jonah field, which is located in the Green River Basin of southwest Wyoming.
All these asset sales are part of BP’s divestiture plan, announced following the Deepwater Horizon disaster in the GoM two years back. The company has a fund-raising objective of about $38 billion by the end of next year and with this latest North Sea divestment, it has already accumulated more than $24 billion since the start of 2010.
We believe the company’s endeavor in disposing of its non-core upstream properties will likely create 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 GoM, Angola, the North Sea, Brazil, Australia and India bode well for its future growth.
We maintain our long-term Neutral recommendation for BP, which holds a Zacks #3 Rank (short-term Hold rating).
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