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BP Exploration Operating Company Limited, a unit of the British energy giant BP plc (BP - Analyst Report) has awarded a contract to oilfield services company, Oceaneering International Inc. (OII - Snapshot Report). Per the deal, Oceaneering will supply umbilicals for BP’s Quad 204 field development, west of Shetland, in the United Kingdom. The contract is valued at $45 million.
The umbilicals cables to be delivered are 11.8 miles (19 kilometers) in length. Oceaneering expects the final phase of product manufacturing to be completed by the second quarter of 2015.
This deal will provide BP with 2 riser and 5 infield umbilicals for electrical and hydraulic power. The umbilicals will also offer chemical injection to subsea trees and production manifolds located at the U.K. energy major’s drill centers at Quad 204.
During the third quarter of 2012, BP and Oceaneering signed a 10-year term agreement − the Global Subsea Hardware Umbilical Agreement − under which the latter is committed to supply umbilicals as well as ancillary equipment and services to BP at satisfying order specifications and terms. This latest contract is part of this agreement.
The Quad 204 development project in the U.K. North Sea is part of BP's endeavor to extend the life of Schiehallion and Loyal fields through 2035. Situated on Blocks 204 and 205, Schiehallion field is considered one of the largest and deepest developments in the North Sea. BP operates the field with a 33.35% interest. Associate partners in the project include Royal Dutch Shell plc (RDS.A - Analyst Report) with a 49.01% stake, while Statoil ASA (STO - Analyst Report), Murphy Oil Corporation (MUR) and OMV each hold a 5.88% stake, respectively. The development plan of Loyal is also underway.
BP remains busy in reshaping its portfolio through the divestment of smaller non-core properties to pay spill-related costs, while holding on to potential big resources. Hence, refocused upstream activities and a leading position in the Gulf region, following the Macondo incident, will definitely help BP in overcoming its near-term tribulations.
BP’s volume shrunk approximately 7% year over year in the fourth quarter of 2012, mainly due to field declines and divestments. However, major project start-ups, an enhanced operation in Angola and higher output in other areas partly offset the decline. Hence, the company’s aim to focus on four high-margin areas – Angola, Azerbaijan, the Gulf of Mexico and the North Sea, will definitely aid BP to grow its output there over the next five years.
BP currently holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months.
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