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BP casts a wide net for asset buyers

United Kingdom
Financial Times
02/07/2010
Carola Hoyos

BP has begun to sound out potential buyers in its $10bn (£6.6bn) asset sale, according to bankers and oil executives.

The company is throwing a wide net. To measure interest it is approaching buyers in many more regions than will eventually be part of the sale.

When BP first announced that it would sell the assets over the coming year to pay for its liabilities from the Gulf of Mexico spill, the obvious candidate to be put up for sale was Pan American, the UK oil company's Argentine venture.

Pan American is a relative loner in BP's portfolio and the 60 per cent stake it owns in Argentina's second- largest oil producer could fetch as much as $9bn, according to bankers, analysts and oil executives.

Irene Himona, analyst at Exane BNP Paribas, says: "It is a clearly identifiable entity [and] it is low-value barrels thanks to the near decade-long price regulation that followed Argentina's debt default."

For BP, Pan American's true value will only be unlocked once Buenos Aires allows fuel to be sold at market prices. But with the need to drum up cash, the company may no longer have the luxury of waiting for that change, says an executive at a rival oil group.

In contrast, the Chinese state oil companies, supported by Beijing, have cash, take a long-range view and have identified Argentina as a target.

In March, CNOOC, China's state-controlled energy company, took 50 per cent of Bridas , BP's partner in Pan American, and thus also a 20 per cent stake in Pan American.

At the time of the deal Yang Hua, CNOOC's president, called it a "good beachhead for us to enter Latin America".

With BP's $170bn stable of fixed assets, Pan American is far from the company's only option and some believe BP would rather sell several small assets than one big one. Analysts do not expect that selling $10bn of assets will be an arduous task.

Before the Macondo well disaster, following the explosion of the Deepwater Horizon rig on April 20, BP had already said it would sell $2bn-$3bn of assets this year as part of its usual portfolio optimisation.

Another $7bn to $8bn of asset sales represent little more than three large oil fields totalling 1bn barrel of probable reserves, or 124,000 barrels a day of production - 3 per cent of BP's total.

Analysts generally see the sale as an opportunity to do in one year what BP would usually do in three.

Rather than worry that BP could find itself hampered by the loss in cash flow and production, they point out that the company may benefit, as long as it does not hold a fire sale with deep discounts.

Christine Tiscareno, analyst at Standard & Poor's equity research, says: "It's an opportunity to do some spring cleaning and get rid of bits and pieces that do not add significant value."

In deciding what bits of its portfolio to dust off, BP is looking mainly at non-core assets and certain fields where it has a minority, non-operator stake. But even within that group, there are nuances, with some mature and even marginal fields remaining attractive assets because of their financial terms - though in some countries where BP has a small stake, the company has been in touch with other oil groups in the hope of making a complete exit.

BP is also considering the political impact of selling assets in certain countries and whether a sale could jeopardise its local foothold.

It was with this in mind that Tony Hayward, chief executive, travelled to Russia this week to meet BP's partners there .

"BP does not want to give the Russian government an impression of weakness," says Ms Tiscareno. Other speculation has centred around the North Sea, where most of the oil fields are in decline. But analysts pointed out that many are good value and BP has reassured its staff in Aberdeen that a wholesale departure from the region was out of the question .

Another region BP intends to retain its presence in is the deep water of the Gulf of Mexico, where it produces more oil than any other company and holds more leases for exploration.

But given the extent of the oil spill, it is likely to have to look at other ways of retaining its presence in the region.

There is at least one former BP executive who speculates that the company may end up selling far fewer assets than expected.

He believes the frenzy of amassing a cash pile to reassure investors and the White House that BP can pay, will die down when engineers stop the leaking well, which BP hopes will happen next month.

Additional reporting by Helen Thomas in New York

See tomorrow's FT Magazine for the inside story of the Gulf of Mexico oil spill

El contenido de las noticias que se presentan en esta sección es responsabilidad directa de las agencias emisoras de noticias y no necesariamente reflejan la posición del Gobierno de México en este u otros temas relacionados.

    

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