BP to Sell $7.9 Billion in Gulf of Mexico Assets: Report

NEW YORK (TheStreet) -- As a way to repay billions in damages related to its 2010 Macondo oil spill, BP (BP) is looking to sell $7.9 billion in Gulf of Mexico assets to buyers including Royal Dutch Shell (RDS.A), ExxonMobil (XOM) and Chevron (CVX), according to a Bloomberg report citing unnamed sources.

The British oil giant is reportedly looking to sell assets including its Horn Mountain, Holstein, Diana Hoover and Ram Powell oilfields, half of which are currently in production. BP, which has the largest deepwater presence in the Gulf of Mexico of any oil major, is to concentrate its regional presence around production hubs tied to its Thunder Horse, Atlantis, Mad Dog and Na Kika oilfields, some of the most successful finds in the Gulf. The assets reportedly being shopped hold 120 million barrels of oil in production reserves and already produce roughly 58,000 barrels a day.

If BP were to find buyers for the Gulf of Mexico fields, Bloomberg reports that the company could take in up to $6 billion in after-tax funds -- the assets are valued at $7.9 billion pre-tax -- as part of the company's $38 billion asset sale program to pay down Macondo spill claims and funds.

In May, BP chief executive Robert Dudley said the company would look to sell "non- strategic" assets in the Gulf.

BP sold over $24 billion in assets, and $10 billion in oil exploration and production assets, according to data compiled by Bloomberg through the end of 2011. BP's largest announced deals are a set of July 2010 asset sales in Western Canada and the Permian Basin to Apache (APC).

Still, the oil giant has run into problems as it looks to sell non-core assets and put the April 2010 Macondo oil spill behind it.

In November, BP saw a $7.1 billion deal to sell a majority 60% stake in an Argentinean oil venture called Pan American Energy fall through when its partners, Bridas of Argentina and CNOOC (CEO) of China, objected to negotiations. The move was a hit to BP, which in October announced it would raise $45 billion through divestitures by 2013.

After CNOOC and Bridas walked away from BP's Pan American sale, the company indicated in a statement that it would be "happy to return to long-term ownership" of the assets after its finances improved. In November, BP said that its sale program is focused on eliminating "non-strategic assets and not driven by a requirement to raise cash."

After its Bridas setback, BP returned quickly to the deals table, selling its natural gas liquids business in Canada to Plains All American Pipeline (PAA) for $1.67 billion.

On Monday, BP said that it would sell its California oil refinery and 800 statewide gas stations to refining giant Tesoro (TSO) for $2.5 billion, one of two refineries -- the other being Texas City -- that BP has been trying to sell for several years.

Gulf of Mexico M&A activity has picked up in recent years. In 2010, Devon Energy (DVN) sold Gulf of Mexico assets to BP as part of a $7 billion deal -- a BP acquisition in the Gulf that occurred less than two months before the Macondo well disaster -- as Devon raised capital to focus on shale drilling opportunities, amid a land drilling boom in North America.

In February, private equity giant Apollo Global Management (APO) bought El Paso's oil exploration and production unit -- which has a presence in the Gulf -- for $7.15 billion as part of the company's merger with pipeline giant Kinder Morgan (KMI).

-- Written by Antoine Gara in New York