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BHP Billiton Limited (BHP - Analyst Report) has entered into an agreement with PetroChina International Investment (Australia) Pty Ltd, whereby the latter will purchase a stake in Browse Joint Venture, located offshore Western Australia, from BHP. The gas project is still in its proposal state. The sale includes an 8.33 percent stake in the East Browse Joint Venture along with a 20 percent stake in West Browse Joint Venture.

The agreement value is approximated at US$1.63 billion, payable in cash. It is expected that the sale will close in the first half of calendar year 2013, subject to certain regulatory approvals and other customary closing conditions.

The Browse Joint Venture is an initiative by the Woodside Petroleum Limited to uplift the economic and social development in the Kimberley region. The other participants in the project include Woodside Energy Ltd., Shell Developments Australia Pty Ltd., BP Developments Australia and Japan Australia LNG (MIMI Browse) Pty Ltd.

PetroChina is the largest oil producer in Asia and this purchase forms a critical part of the company’s plans to outpace its Chinese counterparts to acquire assets internationally, in the wake of increased Chinese demand for imported oil and gas.

BHP Billiton Chief Executive, Petroleum, J Michael Yeager describes the agreement as a win-win situation for both the parties, as PetroChina will own a share in an excellent gas resource and BHP will be able to focus more on its core business, exiting a non-strategic asset. However, the other partners in the joint venture have an option to acquire BHP’s share in the project by matching the offer available.

BHP is one of the world’s largest diversified resource companies with operations spanning several continents. It has interests in mineral exploration, production and processing, oil and gas exploration and development, and steel production and merchandising.

We currently maintain a Neutral recommendation on the stock. The stock also bears a Zacks #4 Rank, which implies a short-term (1-3 months) Sell rating. The company competes against industry players including Rio Tinto Plc (RIO - Analyst Report) and Vale S.A. (VALE - Analyst Report), both holding a Zacks #3 Rank, implying a Hold rating.

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