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UK supermajor BP plc (BP - Analyst Report) announced that it has extended its contract with oilfield services firm Subsea 7 for approximately $300 million.

The deal includes subsea construction, inspection, repair as well as maintenance services for the Foinaven and Schiehallion fields in the UK North Sea. The five-year contract extension will begin in 2013 and will continue till 2017.

Per the terms of the contract, Subsea 7’s multi-purpose support vessel – Subsea Viking – will offer widespread support services mainly for BP’s operations in the two fields, west of Shetland and for other assets of BP located elsewhere in the North Sea.

Located on Blocks 204/19 and 204/24a at a water depth of about 450 meters, the Foinaven field represents the first UK deepwater oilfield to be developed on the Atlantic margin.

On the other hand, the Schiehallion field is situated about 161 kilometers west of the Shetland Islands on Blocks 204 and 205. The water depth extends from 350 to 400 meters.

The contract extension is expected to be a positive for BP as this strengthens its relation with Subsea 7, which has helped BP in sustaining activities under tough conditions prevalent in the west of Shetland since 1998.

Further, BP's new strategy of active portfolio management, higher exploration activity, ae nd refining and marketing repositioning is expected to generate value for shareholders.

BP – which recently intended to offload its Texas City refinery as well as other properties to Ohio-based Marathon Petroleum Corp. (MPC - Analyst Report) in an effort to realign its downstream portfolio – has a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.

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