BP begins big sell-off with $7bn deal

The sales will help BP hit its $20bn commitment to funding the clean-up operation.

by
Last Updated: 31 Aug 2010

And lo, the big sell-off commences. BP has announced its first big asset sale: a $7bn (£4.6bn) deal with US oil producer Apache, to offload properties in Texas, New Mexico and Egypt, as well as its western Canadian upstream gas business.

The money it raises will go toward a $20bn commitment to fund the clean-up operation for the Gulf of Mexico oil spill. But with the US government unwilling to give up on allegations of underhand negotiations with Libya, as well as fevered speculation over the future of CEO Tony Hayward, the company is far from out of trouble.

Interestingly, the sale is at a huge premium – the assets were originally slated at just $3.085bn on BP’s books. Does Apache believe they might be worth even more?

The deal is structured so that each asset will be sold off individually, with Apache due to pay a cash deposit of $5bn on 30 July and the rest in a series of payments between October and the following July. The announcement came just a few hours after BP said it was putting properties in Vietnam and Pakistan, worth $1.7bn, up for auction, too. $6.7bn? Not bad for a day’s work, really.

Any cash BP can raise over the next few months will undoubtedly ease growing financial pressure on the company, which has set itself a target to raise $10bn this year to help fund the clean-up operation. The commitment came after the US government demanded it sink at least $20bn into paying for clean-up and compensation in the wake of the disaster.

Meanwhile, David Cameron has been to the US to defend BP’s honour after a US Senate Committee accused the company of putting pressure on the British government to release Lockerbie bomber Abdel Baset al Megrahi, in return for a lucrative oil contract from the Libyan government. The prime minister denied the company’s involvement, saying it was ‘not a decision taken by BP, it was a decision taken by the Scottish government’, and added that he would oppose any legislation brought in that deliberately targets the company. ‘I don’t think that would be right,’ he told a reporter. Very slick, Dave.

But whether Cameron’s smooth talking has softened American attitudes towards the company or not, it doesn’t look as though Hayward will be remaining CEO for much longer. The Times seems to have confirmation that even if the well is sealed, Hayward will resign in the next 10 weeks as part of a defence against any attempted buyout by ExxonMobil or Royal Dutch Shell.

Either way, the beleaguered firm is hanging on in there and perhaps rather better than many expected. But rather like the capped well, the next big question for BP is how long it will be able to withstand the pressure - from the White House, from commercial rivals and even from its own shareholders.

In today's bulletin:

Ocado floats - just - at hefty discount
BP begins big sell-off with $7bn deal
Apple shrugs off 'death-grip' woes as it smashes forecasts
Goldman reports a 'sharp' drop in profits
Sisters are doing it for themselves (and their partners)

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