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Home / Business / BP buys BHP shale assets for more than $ 10 billion

BP buys BHP shale assets for more than $ 10 billion



Sydney-

BP


BP -1.13%

PLC buys the bulk of

BHP Billiton
Ltd.


BHP -1.03%

U.S. Onshore oil and gas unit for 10.5 billion US dollars, as the British oil company in the United States after the Deepwater Horizon disaster is rebuilt and BHP leaves a company that calls it a costly and misjudged investment.

The sale accelerates asset reallocation among global energy companies as oil prices rise to a level that has not been seen since 2014.

Chesapeake energy
Corp.


CHK -0.23%

said Thursday that it sells oil and gas fields in Ohio for $ 2 billion while

Royal Dutch Shell


RDS.A -3.67%

PLC has a $ 30 billion asset-sale program that began after the BG Group acquired approximately $ 50 billion in 2016 , almost complete.

Gas acquisitions of nearly $ 188 billion in 2018 closed at $ 287 billion last year, according to Dealogic.

The deal is an important milestone for BP, which is in the midst of an ambitious growth plan. The company is well on the way to making an impressive comeback after years of decline following its fatal outbreak in the Gulf of Mexico in 2010.

The acquisition will give the British oil giant access to some of the hottest areas in the US Logistical scale can be a big advantage. Large oil companies have in the past been more focused on huge offshore projects, but they are increasingly sinking money into slate developments that begin with the production and quick withdrawal of cash.

For BHP, which will receive approximately $ 2.8 billion in compensation In the 2018 financial year, this will end a costly saga that has put the company around $ 20 billion worse off.

When the shale boom changed the US energy landscape a decade ago, the big global corporations got excited. Many overpaid for assets for fear of missing out and often betting on areas of the US that were not as productive. They have also misjudged the volumes of gas that can be generated by new drilling techniques that put a heavy burden on prices. Now there is so much gas that the US is exporting fuel around the world.

BHP paid $ 20 billion in 2011 to purchase US shale deposits and then spent billions to explore and develop them. But a slump in energy prices led to massive impairment charges, including a pre-tax charge of more than $ 7 billion in 2016, the highest single-value adjustment so far.

BHP was also placed in the crosshairs of the activist hedge fund Elliott Management Corp., which called on management to sell the business after building more than 5% of its UK-listed shares. Elliott declined to comment on Friday.

"If we knew what we knew today, you would not do it," former chairman

Jac Nasser

said a year ago. "The timing was far away."

In a second deal announced on Friday, BHP said it would sell its slate business in Fayetteville, Arkansas, to Merit Energy Co. in a $ 300 million agreement. BHP said supervisors must approve both transactions and intend to return the proceeds to the shareholders. It is expected to be completed by the end of October.

The value of combined deals exceeded market expectations for up to $ 10 billion

UBS
.

BHP shares rose 2.2% in Sydney.

BP-General

Bob Dudley

described the deal as transformative for the company's shale business and as an important step in implementing BP's growth strategy.

He highlights BP's share of a booming US energy market that produces record amounts of crude oil per day and exports four times as much oil that was a decade like ten years ago.

BP was skeptical at first because he had long specialized in huge offshore rigs and gas export projects that are prohibitively expensive with falling energy prices and therefore not much country in the country holding valuable oil and gas tanks like the Permian in West Texas, where slate borers led a rebirth of US energy production.

But this deal gives us "some of the best acreage in some of the best cymbals in the onshore US". said

Bernard Looney,

BP's upstream head.

While BP already has a significant position in the US, its portfolio is mainly gas. The assets of BHP will significantly increase the production of valuable oil.

The agreement will add 190,000 barrels of daily oil and gas production and 4.6 billion barrels of discovered resources to BP's asset base, promising production growth in the next decade. 19659006] With this deal BP tries a delicate balancing act. Despite rising oil prices, investors have signaled that companies should remain financially disciplined and reward shareholders who got stuck in 2014 due to a dramatic slump in the industry.

BP announced parallel to the acquisition to increase the dividend for the second quarter by 2.5% – the first such increase in 15 quarters. It has structured the deal with 50% of payments deferred within six months of completion and funded from equity. The company said the acquisition would fit into the current spending budget and gearing targets.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com and Sarah Kent to sarah.kent@wsj.com

Published in the printed issue of July 27, 2018 as "BP to Most of BHP "US shale unit.


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