London-based oil major BP has agreed
to buy Brazilian, Azeri and
Gulf of Mexico
assets from Devon Energy for $7
billion, as the
U.S.
producer refocuses on onshore
U.S.
fields.
The companies said on Thursday that BP has also agreed to sell Devon a 50
percent stake in its Kirby oil sands interests in Alberta, Canada, for $500
million and that the two companies would form a venture to develop Kirby.
The deal gives BP reserves and highly
prospective exploration, mainly in the deep water offshore where it is an
industry leader.
Although the fields will not
significantly contribute to production until after 2015, analysts said, they
will help the company meet its goal of growing production at 1 to 2 percent per
annum in the long term.
Analysts said it was hard to estimate
whether
Europe
's second-largest oil company by market value was paying a good price
for the assets as they included fields whose reserves are unknown as they are
still being explored.
However, most agreed the assets were a
good strategic fit.
"This is a good deal for BP,"
Richard Griffith at Evolution Securities said.
BP shares were unmoved by the deal,
falling 0.4 percent against a 0.1 percent drop in the STOXX Europe 600 Oil and
Gas index at 1327 GMT.
Devon
shares were up 2.8 percent at $73.70 in premarket trading.
The deal also gives BP the entry into
Brazil
which Chief Executive Tony Hayward has long eyed.
However,
Devon
's assets are in the
Campos
basin, rather
than the
Santos
basin where most excitement is focused after multi-billion barrel
discoveries in recent years.
Devon
announced its asset sale program in November, saying it hoped to pull
in as much as $7.5 billion for its international and
Gulf of Mexico
assets as it
looks to focus on its onshore oil and gas fields in
North America
.
The company, which felt investors had
not ascribed a reasonable value to its Gulf and international assets, has
already sold its interest in three deepwater development projects in the
Gulf of Mexico
for about $1.3
billion.
EXPLORATION FOCUSED
The companies did not put a figure on
the reserves that BP was buying but Colin Smith at ICAP estimated that BP has
bought 140 million barrels of oil equivalent (boe) of booked reserves, and
analysts at Morgan Stanely estimated 160 million boe.
ING estimated recoverable reserves could
eventually top more than 800 million barrels.
However, a BP spokesman said the deal
was largely predicated on the exploration upside the fields offer.
Some of the best assets being bought,
such as the Kaskida stake, are at the exploration stage of development and so
have no booked reserves yet.
"Kaskida alone could be worth $6
billion,"
Griffith
at Evolution Securities said, referring to the whole field.
BP is buying around 240 leases in the
Gulf of Mexico
, including
Devon
's 30 per cent interest
in the major Kaskida discovery, in which BP already has a 70 percent stake.
BP is also adding to its existing
interest in the Azeri-Chirag-Gunashli oilfield off the coast of
Azerbaijan
.
Devon
's 5.63 percent stake will increase BP's interest in ACG, which produces
820,000 barrels of oil a day, to 39.77 percent.
The parties will form a 50-50 joint
venture to develop BP's 90,000 net acres of oil sands at Kirby, and this will
be operated by
Devon
.
ICAP's Smith said this could unlock the
potential of Kirby, which has sat dormant in BP's portfolio for years, and
would also help secure a crude supply for BP's Whiting refinery, in which it
has been investing heavily in recent years.
BP should be able to fund the acquisition
out of cashflows or debt, analysts said.
BP's gearing ratio was 21 percent at the
end of 2009, against a targeted 20 to 30 percent range, while analysts believe
the company is highly cash generative at current oil prices.
The cost of insuring BP's debt rose, with
five year credit default swaps rising 5.5 basis points to 49.5 bps, according
to Markit data
Deutsche Bank advised Devon Energy on
the sale while BP did not use an investment bank adviser.
(
from
Reuters)