Plains Exploration to Buy $5.55 Billion Gulf Fields From BP

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.By Jim Polson and Brian Swint - Sep 10, 2012 8:15 AM CT .Facebook Share LinkedIn Google +1 0 Comments
Print QUEUEQ..Plains Exploration & Production Co. (PXP) agreed to buy BP Plc (BP/)’s interests in a group of Gulf of Mexico oilfields for $5.55 billion to increase its crude output.

Production from the deep-water fields is equivalent to 59,500 barrels of oil a day, Houston-based Plains said today in a statement. The purchase includes sole ownership of the Marlin, Dorado, King and Horn Mountain fields and minority stakes in fields operated by Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc. (RDSA)

BP is targeting $38 billion in divestitures by the end of next year.

BP is targeting $38 billion in divestitures by the end of next year. Photographer: Julie Dermansky/Bloomberg
.The deal, larger than the company’s market value, allows Plains to expand in the Gulf’s deep waters after selling shallow-water Gulf assets two years ago. BP is targeting $38 billion in divestitures by the end of next year to raise cash after a 2010 accident in its Macondo well in the Gulf killed 11 workers and caused the largest U.S. offshore oil spill.

“It’s transformational for Plains,” John White who manages about $50 million in energy investments including BP shares at Triple Double Advisors LLC in Houston, said today in a telephone interview. “The price is in line with other oil deals and may be slightly favorable to Plains.”

The transaction includes a half stake in BP’s Holstein field. Separately, Plains agreed to buy the other half from Shell for about $560 million, The Hague-based company said today in a statement.

‘Happy’ Lenders
As of Sept. 7, Plains rose 9.8 percent this year in New York trading, outpacing a 2.2 percent gain by the 17-member Standard & Poor’s 500 Oil & Gas Exploration & Production Index. (S5OILP)

Plains fell 3.3 percent to $39 at 8:48 a.m. in New York, before regular trading began on U.S. markets. BP rose 0.7 percent in London.

Plains “can hedge out the production from this and keep the lenders happy,” White said.

Today’s sale brings BP’s total asset sales since the beginning of 2010 to more than $32 billion, the London-based company said in a statement. BP has set aside $38 billion to pay for the Gulf spill, including a $20 billion trust fund for victims.

“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.”

JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) advised Plains on the deal, effective Oct. 1 and expected to close by year-end. JPMorgan led financing by a bank group that also includes Barclays, Bank of America Corp., Bank of Montreal, Citigroup Inc. (C), Royal Bank of Canada, Bank of Nova Scotia, Toronto- Dominion Bank (TD) and Wells Fargo & Co. (WFC)

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pxp paid too much? mkt sure is unhappy about something re this deal---down ~$4.