BP to Sell GoM Assets to Plains

British energy giant BP plc ( BP - Analyst Report ) has entered into an agreement with oil and gas producer Plains Exploration & Production ( PXP - Analyst Report ) to sell oilfields in the Gulf of Mexico (GoM) for $5.5 billion. In fact, BP agreed to sell almost all non-core field assets in the region to cover anticipated damages for its 2010 Gulf oil spill.

Per the deal, BP will sell its 100% interest in the Marlin hub, 100% interest in the Horn Mountain field and 50% stake in the Holstein field. The deal also comprises BP's share in two non-operated assets, Ram Powell (31%) and Diana Hoover (33.33%).

Last month, Bloomberg had reported that BP 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.

However, considering that the GoM forms an important region for the company, BP has no intention of withdrawing from the area 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.