(Reuters) – BP Plc ( BP.L ) has agreed to purchase US oil and gas deposits of shale oil from global mining company BHP Billiton ( BLT.L ) ( BHP.AX ) for $ 10.5 billion, extending the footprint of the British oil company in oil-rich onshore basins in its largest deal in nearly 20 years.
FILE PHOTO: Andrew Mackenzie, CEO of BHP Billiton, appears on June 5, 2017 in Tokyo, Japan, from a canvas projecting the company's logo. REUTERS / Kim Kyung-Hoon / archival photo
The acquisition marks a major turning point for BP since the Deepwater Horizon derrick catastrophe in the Gulf of Mexico in 2010, for which the company still receives more than $ 65 billion in fines and cleanup costs paid.
"This is a transformative takeover for our Lower 48 business, an important step in the implementation of our upstream strategy and a first-in-class complement to BP's distinctive portfolio," BP chief Bob Dudley said in a statement.
In another sign of recovery, BP said it would raise its quarterly dividend for the first time in nearly four years and announce a $ 6 billion share buyback, which was to be partially funded through the sale of upstream equipment.
The sale concludes a catastrophic seven-year investment by BHP in the shale industry that has forced investors in US hedge fund Elliott Management to sell the company over the past 18 months. BHP put the business up for sale in August of last year.
Investors and analysts said the selling price was better than expected and were pleased that BHP was planning to return the proceeds to the shareholders.
"It was the wrong environment to have bought the assets when they did, but this is the right market to sell them," said Craig Evans, co-portfolio manager of the Tribeca Global Natural Resources Fund.
Analysts said they had assumed that BHP would receive between $ 8 billion and $ 10 billion in cash for the assets.
BHP acquired more than $ 20 billion in slate assets in 2011 from its acquisition of Petrohawk Energy and shale gas from Chesapeake Energy Corp but suffered from the collapse in gas prices and was forced to write down heavily.
The world's largest miner said it would earn another $ 2.8 billion after-tax slate fee in its 2018 results.
U.S. BOOST FOR BP
The deal, BP's largest since acquiring oil company Atlantic Richfield Co in 1999, will increase its US onshore oil and gas reserves by 57 percent.
BP will take over the unit from BHP, which holds the assets of Eagle Ford, Haynesville and Perm for $ 10.5 billion, giving it "some of the best land in some of the best catches in the onshore US" ,
It struck rivals including Royal Dutch Shell ( RDSa.L ) and Chevron Corp ( CVX.N ) for assets that combined a production of 190,000 barrels of oil equivalent per day (boe / d) and 4.6 billion barrels of oil equivalent resources.
BP said the transaction would increase earnings and cash flow per share, and it would continue to be able to maintain its leverage within a range of 20-30 percent.
The company also said it would increase its quarterly dividend by 2.5 percent to 10.25 cents per share, the first increase in 15 quarters.
In the meantime, a unit of Merit Energy Company will buy BHP Billiton Petroleum (Arkansas) Inc and the assets of Fayetteville for $ 0.3 billion.
Evans of Tribeca welcomed the clean exit for cash deposits and not for swaps that BHP had identified as a possibility.
"The company has plenty of room to concentrate on its much better offshore oil business," he said.
BHP CEO Andrew Mackenzie said the company had kept its promise of value for its shale, while the sale was consistent with a long-term plan to simplify and strengthen its portfolio.
BHP ( BHP.AX ) shares rose 2.3 percent after announcement, outperforming the broader market and rival Rio Tinto ( RIO.AX ) ( RIO .L ).
BP said it would pay the $ 10.5 billion in installments over a six-month period from the date of completion, with $ 5.25 billion of the consideration to be raised by selling new shares.
Elliott had no immediate comment on the sales announcement.
Reporting by Sonali Paul, Additional Reporting by Aditya Soni in Bangalore; Edited by James Dalgleish and Richard Pullin