BP has agreed to acquire a portfolio of unconventional oil and gas assets from BHP Billiton Petroleum (North America).
The acquisition will bring BP extensive oil and gas production and resources in the regions of the Permian and Eagle Ford basins in Texas and in the Haynesville gas basin in Texas and Louisiana.
Under the terms of the agreement, BP America Production Company will acquire from BHP 100% of the issued share capital of Petrohawk Energy Corporation – the wholly-owned subsidiary of BHP which holds the assets – for a total consideration of $10.5bn, subject to customary adjustments.
On completion, $5.25bn, as adjusted, will be paid in cash from existing resources. $5.25bn will be deferred and payable in cash in six equal instalments over six months from the date of completion. BP intends to finance this deferred consideration through equity issued over the duration of the instalments. Subject to regulatory approvals, the transaction is anticipated to complete by the end of October 2018.
Bob Dudley, BP group chief executive, said, “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. Given our confidence in BP’s future – further bolstered by additional earnings and cash flow from this deal – we are increasing the dividend, reflecting our long-standing commitment to growing distributions to shareholders.”
After integration of the acquisition with BP’s existing US onshore business, the transaction will be accretive to BP’s earnings and cash flow on a per share basis. BP expects the acquisition to be fully accommodated within its current financial frame, with organic capital expenditure in a range of $15-17bn a year out to 2021 and gearing maintained within a 20-30% range.
Following completion of the acquisition, BP intends to make new divestments of $5-6bn, predominantly from the upstream segment. The proceeds are intended to fund a share buyback programme of up to $5-6bn over time. The divestments will be in addition to BP’s ongoing programme of around $2-3bn divestments a year.
BP has agreed to acquire assets with 470,000 net acres of licences, including a new position for BP in the liquids-rich Permian-Delaware basin, and two premium positions in the Eagle Ford and Haynesville basins. The assets have combined current production of 190,000 barrels of oil equivalent per day (boe/d), about 45% of which is liquid hydrocarbons, and 4.6bn barrels of oil equivalent (boe) resources.