Embattled BP is selling $3.25-billion (U.S.) of Canadian natural gas assets to Apache to help pay for a massive bill from its oil spill in the Gulf of Mexico.
The deal is part of a $7-billion sale to Apache that also includes assets in the United States and Egypt, the first major move in BP's previously announced goal to sell $10-billion of holdings to help cover soaring Gulf of Mexico costs.
BP has already spent almost $4-billion to pay for the Gulf disaster and has committed $20-billion for a cleanup and compensation fund administered by the United States government. The Apache deal is "necessary to meet the obligations likely to arise from the Gulf of Mexico oil spill," BP chairman Carl-Henric Svanberg said.
For Houston-based Apache, the deal is the biggest in its history and sharply boosts its Canadian operations, which also include plans to export gas to Asia. The company called the transaction a "rare opportunity to acquire legacy positions from a major oil company," and a move that will "add muscle, enabling Apache to add value for decades to come" in its key operating areas.
The Canadian assets include natural gas and gas liquids production in Alberta and British Columbia. But BP held onto interests in several Canadian oil sands projects in early development stages, as well as its exploration acreage in the Beaufort Sea in the Northwest Territories, for which it won the rights in 2008 by committing to spend $1.2-billion (Canadian) hunting for oil. In May, BP Canada was quizzed by members of Parliament about the safety of Arctic drilling and wasn't able to assure MPs that a blowout like the one in Gulf of Mexico wouldn't spew oil into the Beaufort for months after an accident.
The BP asset acquisition announced Tuesday adds about 13 per cent to Apache's total output. In Canada, it increases production by more than 60 per cent, adding 46,500 oil-equivalent barrels a day of natural gas and gas liquids production and pushing Apache Canada's total to about 120,000 oil-equivalent barrels a day.
Apache also bought "significant" positions in hot natural gas plays such as the Montney in northeastern B.C. Apache, working with EnCana, is particularly active in Canada exploring in the potentially gigantic Horn River field, north of the Montney.
Tim Wall, president of Apache Canada, said the company will "aggressively" develop the promising land.
"You'll see more spending on our part," Mr. Wall said in an interview late Tuesday.
Apache has a capital spending budget of about $1-billion this year, and BP Canada had planned about $250-million.
The deal also gives Apache more gas for a proposed $3-billion export project the company is working on in British Columbia. The facility in Kitimat in northwestern B.C. - in theory to be filled with gas discoveries from northeastern B.C. - would be the first-ever large export of Canadian gas to markets other than the U.S.
This is the second time in two decades that BP has retrenched in Canada. In the early 1990s, BP's Canadian division was spun out as Talisman Energy. Then in the late 1990s, BP was back in Canada when it bought Amoco, a U.S. oil company. BP quickly sold its Canadian oil assets for $1.6-billion to Murray Edwards' Canadian Natural Resources and Penn West Petroleum, including the land that became the Horizon oil sands mine.
For several years, BP Canada maintained a position as a medium-size natural gas and gas liquids producer, which is what was sold to Apache on Tuesday.
But BP has also taken a big position in the oil sands, where it is a partner on Husky Energy's $2.5-billion Sunrise project, currently in development. This year, BP took stakes in two early-stage projects involving Devon Energy and Value Creation.
"Looking at the company's strategy going forward, the oil sands are very key, as [is]the Beaufort," BP Canada spokeswoman Hejdi Feick told Canadian Press.
BP PLC did not sell Apache a stake in its Alaskan oil business, as had been previously rumoured.
To help pay for the deal, Apache announced a common stock and preferred stock offering of about $3-billion (U.S.). The company had $1.8-billion of cash on hand at the end of June.
Also on Tuesday, Bloomberg News reported that a BP spokeswoman confirmed the company will sell oil and natural gas assets in Pakistan and Vietnam. No price was mentioned.Report Typo/Error