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$10.5bn Deal Struck By BP To Buy BHP's US Shale Oil And Gas Assets

$10.5bn Deal Struck By BP To Buy BHP's US Shale Oil And Gas Assets
UK based oil major BP will acquire the shale oil and gasfields in the US belonging to the Anglo-Australian miner BHP for $10.5bn in a deal that would be the biggest in the last two decades for a UK firm’s biggest acquisition.
While industry experts said that the deal would significantly enhance BP‘s presence in US shale products in comparison to its rivals, the company’s chief executive Bob Dudley described the deal as being a transformational one.
The acquisition would create a new period of growth for the company and would help enhance almost a fifth in production in BP’s US oil and gas production. The company has for years been under a $65 billion debt burden of the Deepwater Horizon disaster and had recently come out of the debt.
The deal covers 470,000 acres of assets in total which includes oil fields in the Permian in west Texas, the Eagle Ford in south Texas and Haynesville in east Texas and Louisiana.
Among the three assets, the most valuable is the Eagle Ford one according to analysts because of its scale and economics. The greatest long-term promise was offered by the Permian asset.
After having bought the fields in 2011, BHP could not manage the assets and ultimately put them up for sale in August last year.
BP would however take a different approach, it said as it would synergize the assets with the other US perations and capital efficiencies worth $350 million.
“It gives us access to some of the best acreage in the best basins. It takes us into the very heart of the most-talked-about oil play in the world [the Permian]”, said Bernard Looney, the chief executive of BP’s upstream division.
He added that the UK oil giant was “not desperate to do a deal” but added that the deal was worthwhile because of the quality of the resources.
The production of BP would reach 885,000 barrels of oil equivalent per day from its current number of 744,000 boe/d after the deal.
“BP was previously underweight to US tight oil compared to its peers. This deal transforms BP’s US business,” Maxim Petrov, a senior analyst at Wood Mackenzie, said.
BP said it was making “conservative assumptions” about how much oil and gas could be pumped to begin with, given regional bottlenecks around infrastructure such as pipelines. “We think the infrastructure will get built out over the next two years,” Looney said.
In recent years, the largest deal made by BP was that of a $200 million investment in one of Europe’s largest solar companies and its 130 million pounds buying of the largest electric car charging company of the UK.

Christopher J. Mitchell

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