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British energy giant BP plc (BP - Analyst Report) is close to a $7 billion pact related to the divestment of its Gulf of Mexico (GoM) offshore oil fields to Houston-based Plains Exploration & Production Company (PXP), according to the Wall Street Journal report.
As discussions are ongoing, the announcement of a deal by this week is likely, unless negotiations turn unfavorable. The GoM assets have raised significant interest among numerous bidders.
Last month, Bloomberg had reported that plans to offload a group of GoM oilfields, reflecting its effort to raise capital while divesting its assets following the 2010 catastrophic oil spill in the region. The deal is all part of BP’s plan to retain its flexibility while reshaping its U.S. operations by releasing up to 5 billion to 6 billion in cash, after taxes, to pay down its liabilities. Prospective bidders could include major U.S. energy companies like Chevron Corp. (CVX - Analyst Report) or ExxonMobil Corp. (XOM - Analyst Report).
BP executives had stated that it intends to offload interests in a number of Gulf based oil fields – Marlin, Horn Mountain, Ram Powell and Diana Hoover – considered to be strategic misfit. As GoM forms an important region for the company, BP has no intention of withdrawing from the region despite the asset sale.
BP had obtained 43 new drilling leases in GoM in June 2012. The company plans to strengthen its Gulf operations around four large production hubs and is likely to employ eight oil rigs in the area by the end of 2012.
Following the oil spill in 2010, which killed 11 workers and spewed more than 200 million gallons of crude, BP is striving to improve its revenue flow. BP’s ongoing negotiations are in line with its divestment program that sees the British major getting rid of its mature, non-core upstream assets to create a portfolio with stronger growth potential from a smaller base.
BP is set to divest around $38 billion worth of assets by 2013, of which it has contracted to sell assets valued at nearly $26.5 billion till date. This includes last month’s sale of a Southern California refinery and associated assets to Tesoro Corporation (TSO - Analyst Report) for $2.5 billion.
BP carries a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.
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