LONDON--London-based oil major BP has agreed to buy Brazilian, Azeri and Gulf of Mexico assets from Devon Energy for $7 billion, as the U.S. producer refocuses on onshore U.S. fields.
The companies said on Thursday that BP has also agreed to sell Devon a 50 percent stake in its Kirby oil sands interests in Alberta, Canada, for $500 million and that the two companies would form a venture to develop Kirby. The deal gives BP reserves and highly prospective exploration, mainly in the deep water offshore where it is an industry leader.
Although the fields will not significantly contribute to production until after 2015, analysts said, they will help the company meet its goal of growing production at 1 to 2 percent per annum in the long term.
Analysts said it was hard to estimate whether Europe's second-largest oil company by market value was paying a good price for the assets as they included fields whose reserves are unknown as they are still being explored. However, most agreed the assets were a good strategic fit.
"This is a good deal for BP," Richard Griffith at Evolution Securities said.
BP shares were unmoved by the deal, falling 0.4 percent against a 0.1 percent drop in the STOXX Europe 600 Oil and Gas index at 1327 GMT. Devon shares were up 2.8 percent at $73.70 in premarket trading.
The deal also gives BP the entry into Brazil which Chief Executive Tony Hayward has long eyed. However, Devon's assets are in the Campos basin, rather than the Santos basin where most excitement is focused after multi-billion barrel discoveries in recent years.
Devon announced its asset sale programme in November, saying it hoped to pull in as much as $7.5 billion for its international and Gulf of Mexico assets as it looks to focus on its onshore oil and gas fields in North America. The company, which felt investors had not ascribed a reasonable value to its Gulf and international assets, has already sold its interest in three deepwater development projects in the Gulf of Mexico for about $1.3 billion.
The companies did not put a figure on the reserves that BP was buying but Colin Smith at ICAP estimated that BP has bought 140 million barrels of oil equivalent (boe) of booked reserves, and analysts at Morgan Stanely estimated 160 million boe. ING estimated recoverable reserves could eventually top more than 800 million barrels.
However, a BP spokesman said the deal was largely predicated on the exploration upside the fields offer. Some of the best assets being bought, such as the Kaskida stake, are at the exploration stage of development and so have no booked reserves yet.
"Kaskida alone could be worth $6 billion," Griffith at Evolution Securities said, referring to the whole field.
BP is buying around 240 leases in the Gulf of Mexico, including Devon's 30 per cent interest in the major Kaskida discovery, in which BP already has a 70 percent stake. BP is also adding to its existing interest in the Azeri-Chirag-Gunashli oilfield off the coast of Azerbaijan.
