BP Plugs Spill Bill With Gas Deal

NEW YORK ( TheStreet) -- BP ( BP) announced a sale Thursday of its natural gas liquids business in Canada to Plains All American Pipeline ( PAA) for $1.67 billion.

The deal may be a plug to the $40 billion in claims connected to its 2010 oil spill in the U.S. Gulf of Mexico. BP, which recently said it would sell $45 billion of upstream and downstream assets to meet costs related to the spill, has recently stumbled in sales of other businesses.

Earlier in November, a deal to sell BP's majority stake in an Argentinean oil venture called Pan American Energy for $7.1 billion fell through when its partners Bridas and CNOOC ( CEO) of China objected to negotiations. That deal would have been its largest post-spill asset sale.

With Thursday's natural gas sale to Plains, BP may be back on track in cutting deals to help it pay spill victims. The company is also looking to sell refineries in Texas as part of its asset sale plan.

"Canada remains an important part of our portfolio of growth opportunities to meet North America's energy needs," said BP's chief executive Robert Dudley in a statement. Dudley replaced former-CEO Tony Hayward in the aftermath of the spill and announced in July 2010 that the company would look to sell $30 billion worth of assets. That number has since been raised.

Since June 2010, BP has announced over $17.5 billion in assets, with just over $10 billion in sales coming from oil exploration and production assets, according to data compiled by Bloomberg. Thursday's deal signals that increasingly, the company may look to divest downstream operations like pipelines and refineries.

In July 2010, BP announced its largest post-spill divestitures, selling over $6 billion in U.S. and Canadian oil and gas assets to Apache ( APC). As it stands, Thursday's pipeline sale to Plains is its biggest single downstream sale yet and its fifth biggest post-Macondo divestiture, according to Bloomberg data.

"BP's Canadian NGL business is an asset-rich platform that significantly expands our LPG asset footprint," said Greg L. Armstrong Chief Executive of Plains All American in a statement.

The purchase will bolster the company's pipeline ambition as it crosses with other competitors in acquisition talks. With BP's Canadian natural gas liquids operations, Plains will pick up 4,000 kilometers of pipelines and 21 million barrels of storage capacity in Canada. Overall, Plains operates over 16,000 miles in pipelines.

Earlier in November, energy pipeline transporter SemGroup ( SEMG) rejected a bid by Plains in a continued statement that it is bidding too cheaply on the company.

SemGroup's Board of Directors rejected an unsolicited October bid of $24 per share in cash for the Tulsa based energy transporter, terminal and storage company. In its statement rejecting the hostile offer, SemGroup pointed to its stock value nearly 20% higher than Plains's bid. About the bid, Semgroup said it "continues to believe that your current proposal is opportunistic and fails to adequately reflect SemGroup's bright prospects."

It isn't the first time Plains has made a low priced bid for Semgroup and it's just another chink in a multi-year takeover drama.

The now quashed hostile bid was a culmination of almost two years of opposition by Plains to SemGroup's recovery strategy from a 2009 bankruptcy and resulting civil litigation with the Securities and Exchanges Commission. In March 2010, Plains offered to buy SemGroup out of bankruptcy for $17 a share. The offer that was rejected by SemGroup's board and company instead went public in November 2010 and priced at over $24 a share on the first day of trading.

In August, SemGroup announced it would raise $181 million by doing a public offering for Rose Rock Midstream -- previously the storage and pipeline division of the company that holds a crude storage facility at the delivery point for West Texas Intermediate in Cushing, Oklahoma. SemGroup also announced a spin of its SemStream businesses and said that the proceeds of both transactions would be used to pay down the company's $343 million in debt.

Plains's takeover offers are a rebuff to SemGroup's spin strategy and its overall post-bankruptcy planning.

-- Written by Antoine Gara in New York