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Vol. 15, No. 37 Week of September 12, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

For sale: BP Alaska?

Speculation flares anew the beleaguered oil giant is shopping North Slope assets

Wesley Loy

For Petroleum News

Speculation has stormed back about the possibility BP might sell off its Alaska holdings as part of an effort to raise cash to cover the costs of the Deepwater Horizon disaster.

The talk stems mainly from media reports coming out of London, where BP is based.

The reports suggest an assortment of players, some familiar and some new, are potential bidders for BP properties. The supposed suitors include Apache, Occidental Petroleum and even BP’s Russian joint venture, TNK-BP.

Asked about the reports, BP Alaska spokesman Steve Rinehart responded with a now familiar refrain: “We do not comment on market speculation.”

‘Banking sources’

The latest flurry of speculation began with Sept. 5 stories in a pair of British newspapers, the Financial Times and the Sunday Times.

“BP has revived the sale of its fields in Alaska after failing to dispose of them to Apache of the US earlier this year,” the Financial Times story began. “The UK oil group is hoping to sell part of its stake in Prudhoe Bay, the giant Alaskan field, according to banking sources.”

The story continued: “Apache is still seen as a buyer by industry bankers, who also cited Occidental, a US group, as another potential suitor. It is not known whether BP would be willing to sell the entire stake, which would include the operatorship of the field.”

The Sunday Times reported BP had raised its cash target for dealing with Deepwater Horizon to $40 billion, up from the company’s previously stated $30 billion goal.

Another media outlet, Voice of Russia, on Sept. 6 discussed potential for TNK-BP to acquire BP assets in the North Sea, with a passing reference to Alaska assets as well.

The financial news service Bloomberg, however, on Sept. 7 quoted BP’s Norway managing director, Rebecca Wiles, as saying, “I’m not aware of us lining up any assets in the North Sea.” She also reportedly said she hadn’t heard the company was increasing its asset sales target to $40 billion.

Apache back in the hunt?

Speculation ran hot back in July that Apache Corp., a large Houston-based independent, was in talks to buy BP’s stake in Prudhoe Bay and other Alaska North Slope fields, with BP looking for $10 billion to $12 billion on the deal.

Ultimately, Apache and BP did do a deal, but for different assets entirely. On July 20 the companies announced a $7 billion deal in which Apache will pick up an assortment of BP assets in western Canada, Egypt and the Permian basin of Texas and New Mexico.

Apache this year also has made a strong move in Alaska’s Cook Inlet basin, buying some 200,000 acres of leases from private investors.

A group of Apache managers was in Anchorage in late August, and they said the company’s Alaska focus would be on Cook Inlet rather than the North Slope.

Occidental Petroleum, or Oxy, is a Los Angeles-based independent. “We are the fourth-largest U.S. oil and gas company, based on market capitalization of $66 billion at year-end 2009, with nearly 30,000 employees and contractors on four continents,” the company website says.

Although declining for years, Prudhoe Bay remains the top-producing U.S. oil field and a big piece of BP’s business.

State records show that BP holds a 26.36 percent working interest in the Prudhoe Bay unit, ExxonMobil owns 36.40 percent, ConocoPhillips owns 36.08 percent, and Chevron holds 1.16 percent.

BP, in its annual report filed March 5 with the U.S. Securities and Exchange Commission, said its net share of production from Prudhoe Bay was 69,000 barrels per day in 2009.

BP operates 15 North Slope fields including Prudhoe, and owns a share in six other producing fields.

While no one from any company involved confirmed it publicly, the belief was that the purported Prudhoe sale to Apache fell through in part because the transaction was simply too complex.

On July 27, BP announced it planned to sell assets for up to $30 billion over the next 18 months, primarily in the upstream business. As of press time, BP had not officially revised that estimate.

Media reports talked of potential sales all over the globe: Venezuela, Argentina, Pakistan, Africa. On Sept. 1, BP announced it had agreed to sell its interests in ethylene and polyethylene production in Malaysia for $363 million.

On Sept. 8, BP released its investigative report on the Gulf of Mexico blowout that killed 11 rig workers and unleashed the nation’s largest oil spill.

The report concluded that decisions made by “multiple companies and work teams” contributed to the accident, including what outgoing BP chief executive Tony Hayward called “a bad cement job” in the Macondo well.

The Financial Times reported Sept. 3 that BP’s bill for responding to the catastrophe had reached $8 billion.

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