PXP BP Assets Buy?
Re: PXP BP Assets Buy?
“BP’s got a good price, we were counting on them getting about $3.5 billion,” Jason Gammel, an analyst at Macquarie Capital Europe Ltd. in London, said today in a phone interview. “They’re almost done with their asset sales now.”
5.5B / 3.3B = 1.77 big diff in opinion of asset
5.5B / 3.3B = 1.77 big diff in opinion of asset
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prince_jake_33
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Re: PXP BP Assets Buy?
Plains Exploration & Production Co. (PXP) agreed to buy BP Plc (BP/)’s and Royal Dutch Shell Plc (RDSA)’s stakes in a group of Gulf of Mexico oil fields for $6.1 billion, doubling crude production in its biggest acquisition since 2007.
BP, which has been selling assets after causing the worst marine oilspill in U.S. history, sold its fields for $5.55 billion. Shell sold its stake in a field co-owned with BP for $560 million, according to a statement today.
Enlarge image Plains Exploration to Buy $5.55 Billion Gulf Fields From BP
BP is targeting $38 billion in divestitures by the end of next year. Photographer: Julie Dermansky/Bloomberg
The acquisition amount is larger than Houston-based Plains’ market value. The purchase gives Plains output in the Gulf’s deep waters two years after it sold shallow-water assets to focus on onshore production. The company, which started the day with a market value of $5.2 billion, will borrow $7 billion for the deals. Shares fell as much as 10 percent.
“Their change in strategy took everybody by surprise,” Eliecer Palacios, a New York-based energy sector specialist for Maxim Group LLC who doesn’t rate or own the stock, said today in an telephone interview. “Deep-water production is usually capital intensive and they’d indicated to the street they wanted to get out of it.”
Plains fell 9.3 percent to $36.57 at 2:55 p.m. in New York, the most intraday since June 21. BP rose 0.7 percent to 437.80 pence at the close in London.
‘Full Price’
Plains paid “full price” for the fields and needs to find oil deeper or nearby to make the deals work, Duane Grubert, a Stanford, Connecticut-based analyst for Susquehanna Financial Group, wrote clients today.
The acquisition is Plains’ biggest since it bought Pogo Producing Co., adding onshore U.S. fields for $5.84 billion of cash, stock and debt in 2007, according to data compiled by Bloomberg.
Production from the deep-water fields is equivalent to 67,000 barrels of oil a day and is expected to increase as more wells come online, James C. Flores, Plains chairman and chief executive officer, said on a conference call today.
The purchase will make Plains owner of three offshore platforms, Flores said on the call. It includes sole ownership of BP’s Marlin, Dorado, King and Horn Mountain fields and minority stakes in fields operated by Exxon Mobil Corp. (XOM) and Shell. Plains gets full ownership of the Holstein field and platform, buying both halves from BP and Shell.
“There’s only one way to play the deep-water Gulf of Mexico: It’s with infrastructure,” Flores said of the platforms on the call. “We’ll be able to control our own destiny.”
Controlling Destiny
Deep-water platforms can cost $2 billion before pumping any oil, he said later in an interview. The three platforms will pay for themselves as Plains drills additional wells neglected by BP as it sought higher profits elsewhere, he said.
“The deal is accretive and it will make sense, but it changes investors’ timeline a bit,” said David Deckelbaum, an analyst for KeyBanc Capital Markets in Cleveland, Ohio. Plains paid about $91,000 for each flowing barrel of crude from the fields. Deckelbaum said a comparable price for recent transactions is about $60,000.
Plains will reduce borrowings by selling stakes in natural- gas fields for as much as $2 billion and with $1 billion of annual free cash from the Gulf fields, Chief Financial Officer Winston Talbert said on the call.
The company will sell stakes in Wyoming gas fields operated by ConocoPhillips (COP) and in Louisiana’s Haynesville shale mostly operated by Chesapeake Energy Corp. (CHK) within a year, Flores said. It will hedge as much as 90 percent of oil output to cover debt payments and reduce borrowings, he said.
Plains’ $1 billion of 6.75 percent notes due February 2022 fell 2.5 cents to $1.06 on the dollar to yield 5.9 percent as of 9:56 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
‘Always Disruption’
BP, which has been selling assets after causing the worst marine oilspill in U.S. history, sold its fields for $5.55 billion. Shell sold its stake in a field co-owned with BP for $560 million, according to a statement today.
Enlarge image Plains Exploration to Buy $5.55 Billion Gulf Fields From BP
BP is targeting $38 billion in divestitures by the end of next year. Photographer: Julie Dermansky/Bloomberg
The acquisition amount is larger than Houston-based Plains’ market value. The purchase gives Plains output in the Gulf’s deep waters two years after it sold shallow-water assets to focus on onshore production. The company, which started the day with a market value of $5.2 billion, will borrow $7 billion for the deals. Shares fell as much as 10 percent.
“Their change in strategy took everybody by surprise,” Eliecer Palacios, a New York-based energy sector specialist for Maxim Group LLC who doesn’t rate or own the stock, said today in an telephone interview. “Deep-water production is usually capital intensive and they’d indicated to the street they wanted to get out of it.”
Plains fell 9.3 percent to $36.57 at 2:55 p.m. in New York, the most intraday since June 21. BP rose 0.7 percent to 437.80 pence at the close in London.
‘Full Price’
Plains paid “full price” for the fields and needs to find oil deeper or nearby to make the deals work, Duane Grubert, a Stanford, Connecticut-based analyst for Susquehanna Financial Group, wrote clients today.
The acquisition is Plains’ biggest since it bought Pogo Producing Co., adding onshore U.S. fields for $5.84 billion of cash, stock and debt in 2007, according to data compiled by Bloomberg.
Production from the deep-water fields is equivalent to 67,000 barrels of oil a day and is expected to increase as more wells come online, James C. Flores, Plains chairman and chief executive officer, said on a conference call today.
The purchase will make Plains owner of three offshore platforms, Flores said on the call. It includes sole ownership of BP’s Marlin, Dorado, King and Horn Mountain fields and minority stakes in fields operated by Exxon Mobil Corp. (XOM) and Shell. Plains gets full ownership of the Holstein field and platform, buying both halves from BP and Shell.
“There’s only one way to play the deep-water Gulf of Mexico: It’s with infrastructure,” Flores said of the platforms on the call. “We’ll be able to control our own destiny.”
Controlling Destiny
Deep-water platforms can cost $2 billion before pumping any oil, he said later in an interview. The three platforms will pay for themselves as Plains drills additional wells neglected by BP as it sought higher profits elsewhere, he said.
“The deal is accretive and it will make sense, but it changes investors’ timeline a bit,” said David Deckelbaum, an analyst for KeyBanc Capital Markets in Cleveland, Ohio. Plains paid about $91,000 for each flowing barrel of crude from the fields. Deckelbaum said a comparable price for recent transactions is about $60,000.
Plains will reduce borrowings by selling stakes in natural- gas fields for as much as $2 billion and with $1 billion of annual free cash from the Gulf fields, Chief Financial Officer Winston Talbert said on the call.
The company will sell stakes in Wyoming gas fields operated by ConocoPhillips (COP) and in Louisiana’s Haynesville shale mostly operated by Chesapeake Energy Corp. (CHK) within a year, Flores said. It will hedge as much as 90 percent of oil output to cover debt payments and reduce borrowings, he said.
Plains’ $1 billion of 6.75 percent notes due February 2022 fell 2.5 cents to $1.06 on the dollar to yield 5.9 percent as of 9:56 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
‘Always Disruption’
Re: PXP BP Assets Buy?
This one will take awhile to figure out. Definitely a bold move by PXP. Typically, these deals work out for the mid-cap buying assets from a Super Major like BP. PXP will focus on these assets and they probably have some "quick hits" that will increase production.
I hope to have a revised model for PXP by this weekend.
I hope to have a revised model for PXP by this weekend.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group