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2018-07-27 12:25:00

BP GAS INVESTMENT $10.5 BLN

BP GAS INVESTMENT $10.5 BLN

BPBP transforms its US onshore oil and gas business, acquiring world-class unconventional assets from BHP

Acquisition accretive to earnings and cash flow, delivered within existing financial frame Company increases dividend for first time in 15 quarters

  • Upgrades and repositions BP's US onshore business
    • Brings advantaged oil and gas assets in world-class basins
    • Adds 190,000 boe/d production and 4.6 billion boe discovered resources
    • Boosts liquids share of BP's US onshore production and resources
    • Offers growth into the next decade
  • Creates significant value
    • Accretive to earnings and cash flow on a per share basis
    • Increases Upstream free cash flow target by $1 billion to $14-15 billion in 2021
    • Generates estimated pre-tax synergies of over $350 million a year
  • Fully accommodated within existing financial frame
    • Total cash consideration of $10.5 billion – 50% on completion, 50% deferred over six months
    • Up to $5-6 billion of additional divestments planned to fund share buybacks of up to $5-6 billion over time
    • Unchanged financial frame of $15-17 billion annual organic capital expenditure to 2021, and gearing of 20-30%
  • Strong free cashflow outlook supports dividend rise for second quarter 2018
    • 2.5% rise to 10.25c per ordinary share is first dividend increase since third quarter 2014

In a move that will upgrade and materially reposition its US onshore oil and gas business, BP has agreed to acquire a portfolio of world-class unconventional oil and gas assets from BHP. The acquisition will bring BP extensive oil and gas production and resources in the liquids-rich regions of the Permian and Eagle Ford basins in Texas and in the Haynesville gas basin in Texas and Louisiana.

Under the terms of the agreement, BP America Production Company will acquire from BHP Billiton Petroleum (North America) Inc. 100% of the issued share capital of Petrohawk Energy Corporation – the wholly-owned subsidiary of BHP which holds the assets – for a total consideration of $10.5 billion, subject to customary adjustments.

On completion, $5.25 billion, as adjusted, will be paid in cash from existing resources. $5.25 billion will be deferred and payable in cash in six equal instalments over six months from the date of completion. BP intends to finance this deferred consideration through equity issued over the duration of the instalments. Subject to regulatory approvals, the transaction is anticipated to complete by the end of October 2018.

Bob Dudley, BP group chief executive, said:

"This is a transformational acquisition for our Lower 48 business, a major step in delivering our Upstream strategy and a world-class addition to BP's distinctive portfolio. Given our confidence in BP's future – further bolstered by additional earnings and cash flow from this deal – we are increasing the dividend, reflecting our long-standing commitment to growing distributions to shareholders."

Accretive acquisition, disciplined value growth

After integration of the acquisition with BP's existing US onshore business, the transaction will be accretive to BP's earnings and cash flow on a per share basis. BP expects the acquisition to be fully accommodated within its current financial frame, with organic capital expenditure in a range of $15-17 billion a year out to 2021 and gearing maintained within a 20-30% range.

Following completion of the acquisition, BP intends to make new divestments of $5-6 billion, predominantly from the Upstream segment. The proceeds are intended to fund a share buyback programme of up to $5-6 billion over time. The divestments will be in addition to BP's ongoing programme of around $2-3 billion divestments a year.

Brian Gilvary, BP chief financial officer, said:

"The financial repositioning we have delivered in recent years and the confidence we have in our outlook for free cash flow allow us to take this extremely attractive opportunity now without any adjustment to our financial frame. This is fully consistent with our commitment to financial discipline and creating value for shareholders. With our planned additional divestments and buybacks, we expect to deliver this major step forward for a net investment of around $5 billion."

Liquids-rich assets with synergies

BP has agreed to acquire assets with 470,000 net acres of licences, including a new position for BP in the liquids-rich Permian-Delaware basin, and two premium positions in the Eagle Ford and Haynesville basins. The assets have combined current production of 190,000 barrels of oil equivalent per day (boe/d), about 45% of which is liquid hydrocarbons, and 4.6 billion barrels of oil equivalent (boe) resources.

Bernard Looney, BP's Upstream chief executive, said:

"This is a major upgrade for one of BP's key Upstream regions, giving us some of the best acreage in some of the best basins in the onshore US. I believe our dynamic, highly-efficient team will be able to unlock the full potential of these assets. This will increase our target for free cash flow from the Upstream by $1 billion, to $14-15 billion in 2021, and provide opportunities for continuing growth well into the next decade."

The acquisition will significantly increase the liquid hydrocarbon proportion of BP's production and resources in the US onshore, to around 27% of production and 29% of resources from the current 14% and 17% respectively.

BP's existing US onshore oil and gas business currently produces around 315,000 boe/d from operations across seven oil and gas basins in five states with resources of 8.1 billion boe. Since BP established it as a separate business organization with new management four years ago, it has grown production and improved capital efficiency, with unit production costs reduced by 34% since 2013.

The combined business will continue to be led by David Lawler, CEO of BP's existing US onshore business. BP estimates that post-integration it will deliver more than $350 million of annual pre-tax synergies through sustainable cost reductions and commercial and trading opportunities unique to BP.

Growing distributions for shareholders

BP has today announced a second quarter 2018 dividend of 10.25 cents per ordinary share, an increase of 2.5%. This dividend is expected to be paid on 21 September 2018 to ordinary shareholders and American Depositary Share (ADS) holders on the register on 10 August 2018. Holders of ADSs are expected to receive $0.615 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs.

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Earlier: 

 BP: GROWTH IN ENERGY DEMAND UP
2018, June, 15, 11:10:00

BP: GROWTH IN ENERGY DEMAND UP

BP - In 2017 global energy demand grew by 2.2%, above its 10-year average of 1.7%. This above-trend growth was driven by stronger economic growth in the developed world and a slight slowing in the pace of improvement in energy intensity.

 BP PROFIT $2.5 BLN
2018, May, 2, 13:05:00

BP PROFIT $2.5 BLN

BP - “We have delivered another strong set of results. Our safe and reliable operations and strong financial delivery have continued into 2018. Underlying profit was up 23% on the previous quarter and was our best quarterly result in three years. With rising output from our new major projects and excellent reliability, Upstream production was 9% higher than a year earlier.

 BP - ROSNEFT STRONG PARTNERSHIP
2018, April, 25, 09:40:00

BP - ROSNEFT STRONG PARTNERSHIP

REUTERS - BP (BP.L) has a “very strong” partnership with Russian oil giant Rosneft (ROSN.MM) but will steer away from politics, Chief Executive Officer Bob Dudley said on Tuesday, as Moscow could face new western sanctions.

 BP STARTS IN EGYPT
2018, February, 14, 09:40:00

BP STARTS IN EGYPT

BP announced the start of gas production from the Atoll Phase One project, offshore Egypt. The project, in the North Damietta concession in the East Nile Delta, was delivered seven months ahead of schedule and 33% below the initial cost estimate.

 BP PROFIT $3.4 BLN
2018, February, 7, 07:30:00

BP PROFIT $3.4 BLN

BP - “2017 was one of the strongest years in BP’s recent history. We delivered operationally and financially, with very strong earnings in the Downstream, Upstream production up 12%, and our finances rebalanced. And we did all this while maintaining safe and reliable operations. “We enter the second year of our five-year plan with real momentum, increasingly confident that we can continue to deliver growth across our business, improving cash flows and returns for shareholders out to 2021 and beyond. “At the same time, we are embracing the energy transition, seeking new opportunities in a changing, lower-carbon world.”

 BP EXPANDS IN CHINA
2018, February, 5, 07:30:00

BP EXPANDS IN CHINA

BP - BP and Shandong Dongming Petrochemical Group (Dongming Petrochemical) announced the signing of joint venture agreements to develop a leading branded retail fuels and convenience business covering the Chinese provinces of Shandong, Henan and Hebei. Subject to regulatory approvals, the partnership with Dongming Petrochemical will start operations in 2018 and the network is expected to grow to 500 sites in 10 years. BP has a 49% equity share of the joint venture and Dongming Petrochemical the remaining 51%.

 РОСНЕФТЬ И BP РЕАЛИЗУЮТ
2017, December, 25, 20:15:00

ROSNEFT - BP DEVELOPMENT

ROSNEFT - Rosneft and BP have agreed to develop subsoil resources within the Kharampurskoe and Festivalnoye licence areas of the Yamalo-Nenets Autonomous Okrug in northern Russia, with total geological reserves exceeding 880 bcm of gas.

 

Tags: USA, BP, BHP, GAS, INVESTMENT