BP to Buy BHP Shale Assets for More Than $10 Billion -- Update
July 26 2018 - 8:54PM
Dow Jones News
By Rhiannon Hoyle and Sarah Kent
SYDNEY -- BP PLC will buy the bulk of BHP Billiton Ltd.'s U.S.
onshore oil-and-gas unit for US$10.5 billion, as the U.K. oil major
rebuilds in the U.S. after the Deepwater Horizon disaster and BHP
exits a business it has called a costly and mistimed
investment.
The sale accelerates a reshuffling of assets among global energy
companies as oil prices surge to levels not seen since 2014.
Chesapeake Energy Corp. said Thursday it is selling oil and gas
fields in Ohio for $2 billion, while Royal Dutch Shell PLC has
nearly completed a $30 billion asset-sale program begun after its
roughly $50 billion acquisition of BG Group in 2016.
The deal is an important milestone for BP, which is in the
middle of an ambitious growth plan. The company is on track to
stage an impressive comeback after years of retrenchment following
its fatal blowout in the Gulf of Mexico in 2010.
The acquisition will grant the British oil giant access to some
of the hottest acreage in the U.S. shale patch. Big oil companies
have historically focused more on giant offshore projects, but they
are increasingly sinking money into shale developments that start
producing and throwing off cash faster.
In a second deal, BHP said it would sell its Fayetteville shale
business in Arkansas to closely held Merit Energy Co., in an
agreement worth $300 million.
"The sale of our onshore U.S. assets is consistent with our
long-term plan to continue to simplify and strengthen our portfolio
to generate shareholder value and returns for decades to come,"
said BHP Chief Executive Andrew Mackenzie. The world's biggest
miner by market value said it intends to return the sale proceeds
to shareholders, because net debt is at the lower end of a target
range.
BHP said both deals need to be approved by regulators. It
expects to complete them by the end of October, but that the right
to economic profits would transfer from July 1.
After months of pressure from activist hedge fund Elliott
Management Corp. and other investors, BHP last August announced
plans to exit businesses that included more than 838,000 acres in
shale-rich U.S. regions. Elliott, which built up a stake of more
than 5% in BHP's U.K.-listed shares, declined to comment on news of
the shale sales.
"Our priority with this transaction is to maximize value and
returns to shareholders," Mr. Mackenzie said.
A posttax impairment charge of about $2.8 billion against the
carrying value of the U.S. assets will be booked for the 2018
fiscal year, said BHP.
BP Chief Executive Bob Dudley described the deal as
transformational for the company's shale business and a major step
toward delivering on BP's growth strategy.
While BP already has a sizable position onshore the U.S., its
portfolio mostly comprises gas. BHP's assets will substantially
boost the company's output of more valuable oil.
The deal will add 190,000 barrels a day of oil and gas
production and 4.6 billion barrels of discovered resources to BP's
asset base, promising output growth into the next decade.
In striking the deal, BP is attempting a delicate balancing act.
Despite rising oil prices, investors have signaled they want
companies to remain financially disciplined and reward shareholders
that stuck with them through a dramatic industry slump in 2014.
Alongside the acquisition, BP announced plans to raise its
second quarter dividend by 2.5% -- the first such increase in 15
quarters. It has structured the deal with 50% of the payment
deferred over six months after completion, funded through equity.
The company said that will allow the acquisition to fit within its
current spending budget and targets for gearing.
Robb M. Stewart in Melbourne contributed to this article.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com and Sarah Kent
at sarah.kent@wsj.com
(END) Dow Jones Newswires
July 26, 2018 20:39 ET (00:39 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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