BP Revitalizes Alaska Assets Sale

Includes: APA, BP, OXY
by: Zacks Investment Research

BP plc. (NYSE:BP) has revitalized the sale of its fields in Alaska. The Financial Times reported that the U.K. oil giant is planning to offload part of its stake in Prudhoe Bay, the giant Alaskan field.

BP holds a 26% stake in Prudhoe Bay and also enjoys the operatorship. The newspaper is unsure about the company’s intent to sell its entire stake in the field. Apache Corp. (NYSE:APA), an U.S. oil and gas company, seems to be the potential buyer for this sale.

BP had been in discussion with Apache for the sale of these assets. However, the talks failed in July due to complexities in the transaction. Occidental Petroleum Corp. (NYSE:OXY), a U.S. group, is also a potential suitor. Moreover, BP is also in talks with its Russian venture, TNK-BP, to sell its Venezuelan assets.

The distressed U.K. major said last week that it will sell its Malaysian petrochemical assets for $363 million. These assets include 15% stake in Ethylene Malaysia and 60% interest in Polyethylene Malaysia.

BP is well on track to complete its $30 billion assets sale by end-2011 in order to meet the Gulf of Mexico (GoM) spill costs. The company recently said that it spent approximately $8 billion in response to the spill in the GoM.

Raising funds has been a challenge for BP. So far, the company raised around $10 billion from asset sales. It is also worried about the congressional legislation designed to penalize the company by constraining its operations in the Gulf. The company believes that its cash flows may be adversely affected if it is unable to operate in the area.

Nevertheless, BP’s fundamental strength still remains and its long-term outlook is favorable. We believe that in the long run, the company will perform in line with the broader equity market. Consequently, our Neutral recommendation remains unaltered with the Zacks #3 Rank (Hold).

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