$7 Billion Asset Sale To Apache Seen As Good Deal For BP

By James Herron Of DOW JONES NEWSWIRES LONDON (Dow Jones)--BP PLC's (BP) agreement to sell $7 billion of oil and gas assets in North America and Egypt to Apache Corp. (APA) looks like a good deal for the embattled British company that is reeling from the Gulf of Mexico oil spill, said analysts Wednesday. The price tag demonstrates that although BP needs to raise the funds to cover the huge cost of the spill, its $10 billion divestment process can yield good value and could even produce a more focused company with stronger growth, the analysts said. "Based on the book value it looks like a positive divestment," said ING analyst Jason Kenney. "BP has got a good commercial price. I don't see the process as a fire sale." BP has spent almost $4 billion on the oil spill so far, has agreed to pay another $20 billion into a cleanup and compensation fund over the next 3 1/2 years and could face tens of billions of dollars in fines under the Clean Water Act. To cover these costs, BP has canceled its dividend and said it will sell $10 billion of assets. BP agreed Tuesday to sell to Apache its Permian Basin assets in Texas and southeastern New Mexico, as well as its western Canada natural-gas exploration and production assets. The deal also includes the Western Desert business concessions and East Badr El-din exploration concession in Egypt. Apache will pay a cash deposit of $5 billion on July 30, ahead of BP's first payment of $2.5 billion into the $20 billion compensation fund. The value of the deal is at the top end of expectations, said NCB Stockbrokers analyst Peter Hutton. The $7 billion price equates to $4.50 per barrel of estimated resources, higher than recent deals by Royal Dutch Shell PLC (RDSB.LN) and Total SA (TOT) at $3.90 and $2.10 per barrel respectively, he said. "This is speedy action and divests assets which are not really core to BP at an attractive price, achieving the lion's share of BP's $10 billion target from divestments in 12 months," Hutton said. BP said Tuesday it has also begun the process to sell primarily gas-producing assets in Pakistan and Vietnam. Hutton said that sale could raise another $1.7 billion. Contrary to earlier press reports, the Apache deal did not include assets in Alaska--one of BP's core operational areas. This shows that so far BP is sticking to its plan of only selling non-core assets, said ING's Kenney. "This is a good opportunity for BP to offload some peripheral businesses," he said. "BP can really focus on its core asset base." At 0742 GMT BP shares were up 2.8%, or 11 pence, at 398 pence. -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com (END) Dow Jones Newswires July 21, 2010 04:08 ET (08:08 GMT)