This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

BP's $24B Sale Doesn't Mean a Russian Retreat

Already in October, BP's M&A work has been on full display. The company recently sold its Texas City refinery Marathon Petroleum (MPC) for $2.5 billion, in a deal expressly designed to raise capital for spill claims. Meanwhile, BP's negotiations with Rosneft on its TNK-BP stake have been a front-page deal intrigue for much of the fall.

Throughout 2012, BP's been doing heavy lifting selling refineries, pipelines and oil fields it sees as not crucial to the company's future, in an effort to sell down a forecast $38 billion in assets by 2013. Were the $12.3 billion in TNK-BP cash to be considered part of that asset sale figure, BP would already be complete on its M&A goals.

In September, BP announced a deal to sell $5.5 billion in Gulf of Mexico oil drilling assets to Plains Exploration and Production (PXP). The assets being shopped already produce roughly 59,500 barrels a day and hold a reported 120 million barrels of oil in production reserves.

BP had sold over $24 billion in midstream assets, and $10 billion in oil exploration and production assets, according to data compiled by Bloomberg through the end of 2011.

Still, the oil giant has run into problems as it looks to sell non-core assets, notably in years of speculation on how it would exit Russia after company executives were kicked off of TNK-BP's board - and on its stake in an Argentinean oil venture that's suffered from changing political winds.

In November 2011, 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."

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 at the end of 2011.

In mid August, BP said it would sell its California oil refinery and 800 statewide gas stations to refining giant Tesoro (TSO) for $2.5 billion.

Even with spill-related asset sales hitting a peak in 2012, BP still faces substantial risk when it comes to the lingering legal issues from Macondo.

BP investors and analysts were rattled in late August last week when documents filed by the Department of Justice included language saying the DOJ was going to pursue a gross negligence case against BP.

Reports earlier this year -- as well as the findings of a government investigation into the Macondo spill -- suggested that a gross negligence case would be difficult for the government to prove, and that the government and BP were moving closer to a settlement. Nevertheless, the environmental fine associated with gross negligence if proven could be four times as much as the fine otherwise, and could reach $21 billion.

" Our 'base case' expectation regarding Macondo litigation remains that BP will agree a settlement with the DoJ, which we estimate in the order of ~$20bn," wrote Morgan Stabley analysts led by Martijn Rats, in a Monday note to clients assessing BP's TNK disposal.

-- Written by Antoine Gara in New York

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BP $41.44 0.00%
XOM $88.54 0.00%
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs