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Over the last five days BP has announced either agreements for the sale or the consummation of sales of significant portions of its business. By divesting of these units, cash is flowing into the company coffers to ensure that it can keep its commitments to pay some $20 billion in claims arising out of the Deepwater Horizon disaster. Despite three divestment announcements this past week, including two today, investors don’t seem to be overreacting in either direction. BP shares were selling at 447.15 at midday, down a modest 1.45 pence (0.32%), although still steadily increasing since 18 May this year when the shares had bottomed at 397.00 pence.
August 8th – Sale of Domestic LPG Business
On 8 August BP announced that it will be selling its UK liquid petroleum gas business to DCC Plc. The sales will include all of BP’s LPG business in the UK with the exception of it automotive supply side, which the company will move under its Fuels Value Chain umbrella. That is the division that operates the BP service stations in the UK. With consummation expected in September, this will be a cash free/debt free transaction, with all cash due at settlement. DCC will pay BP $63 million for the business.
August 8th – Sale of Texas Assets
On the same date, BP announced that it had reached an agreement with Eagle Rock Energy Partners for the sale of two processing plants and 2,500 miles of pipelines in Texas. The Sunray and Hemphill processing plants are located in the Texas panhandle and have a combined production capacity of 220 million cubic feet of natural gas per day, although actual average production has been about 180 million.
Under the terms of the sale, the companies will enter into a 20-year supply agreement under which Eagle Rock will gather and process BP production from existing connected wells. BP and its JV partners have agreed to commit all gas production within a two-mile radius of the line for a period of two years following closing on the deal.
BP said that the refineries and pipeline “will be more strategically valuable to a company that specialises in midstream oil and gas operations. Eagle Rock already owns over 3,000 miles of pipeline in the area. Subject to regulatory approval, BP expects the sale to be complete before the end of the calendar year.
Eagle Rock will pay BP $227.5 million in cash.
August 13th – Sale of California Assets
Today BP announced that it will be selling its Carson, California refinery and related assets to Tesoro Corporation. The refinery is located near Los Angeles and is one of the largest refineries on the US West Coast, producing about 266,000 barrels per day. All of the pipelines, storage terminals, and the 800 ARCO brand facilities in the Southwest are included in the deal. BP will lease back the ARCO brand rights for Northern California, Oregon, and Washington. It will also retain ownership of its am/pm convenience stores.
Tesero will pay BP $2.5 billion in cash for the deal.
Bottom Line
BP’s original announced divestment plan was to free up $38 billion by the end of 2013. As of these three announcements the company has sold some $26.5 billion and appears to be well on its way toward its goal.
