PERTH (miningweekly.com) – Mining major BHP has struck deals to divest of its onshore US oil and gas assets for $10.8-billion in cash.
BP American Production Company, a subsidiary of energy major British Petroleum (BP), has agreed to acquire all of the issued share capital of Petrohawk Energy Corporation, which holds the Eagle Ford, Haynesville and Permian assets, for $10.5-billion.
One-half of the cash consideration is payable on completion of the transaction, with the balance of the payment to be made in six equal installments over a six-month period. The first installment will be paid one month after the completion of the transaction.
“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,” BP CEO Bob Dudley said on Friday.
The BHP assets would add some 190 000 barrels of oil equivalent per day to production, and 4.6-billion barrels of oil equivalent in discovered resources.
The transaction will also boost the liquids share of BP’s US onshore production and resources, and will offer the company growth into the next decade.
Meanwhile, BHP has also struck an agreement with MMGJ Hugoton III, which is owned by Merit Energy, to divest of its 100% interest in BHP Billiton Petroleum, which holds the Fayetteville assets, for $0.3-billion.
BHP CEO Andrew Mackenzie said on Friday that the company’s priority with the divestment was to maximise the value and returns to shareholders.
“In August 2017, we confirmed that we would seek to exit our US shale assets for value. Following a robust and competitive process, we have delivered on that commitment. We are pleased that we have agreed to sell all of our shale assets in two simple transactions that provide certainty for shareholders and our employees.”
Mackenzie said that the sale of the onshore US assets was consistent with BHP’s long-term plan to continue to simplify and strengthen its portfolio to generate shareholder value and returns, for decades to come.
“With net debt currently towards the lower end of our target range of $10-billion to $15-billion, and consistent with our capital allocation framework, we expect to return the net proceeds from the transaction to shareholders,” Mackenzie added.
Analyst Wood Mackenzie has said that the transaction with BHP would be transformational for BP, immediately raising the company’s US production by nearly one-fifth while also providing competitive returns and volumes growth.
“We still see a need for BHP’s international oil and gas portfolio, although this runs counter to the recent industry trend of reducing exposure to conventional assets to focus on US unconventionals. The remaining international assets provide strong cash flow, revenue diversification and are vital to servicing the dividend,” WoodMac senior analyst Maxim Petrov said.
“We estimate that the remaining upstream business generates almost half of the company’s current dividend payout. But we expect a simplification of the portfolio to focus on the core assets in Australia and the deep-water Gulf of Mexico.”
BHP was expected to recognize impairment charges of some $2.8-billion post tax against the carrying value of the onshore US assets, in the 2018 financial results.
Income tax expenses from the transaction are expected to be some $200-million, and the cash payable will be less than $100-million after the use of carried forward tax losses held by the BHP US tax consolidated group.