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MELBOURNE (Alliance News) - Anglo-Australian miner BHP Billiton PLC said Friday it has agreed to sell its entire interests in the Eagle Ford, Haynesville, Permian and Fayetteville onshore US oil and gas assets for a combined base consideration of USD10.8 billion, payable in cash.
BP American Production Co, a wholly owned subsidiary of BP PLC, has agreed to acquire 100% of the issued share capital of Petrohawk Energy Corp, the BHP subsidiary which holds the Eagle Ford, Haynesville and Permian assets, for USD10.5 billion, less customary completion adjustments.
One-half of the consideration is payable at completion, with the balance being payable in six equal instalments over a six month period, the first instalment to be paid one month after completion. Payment of the deferred consideration is not subject to any conditions.
Meanwhile, MMGJ Hugoton III, LLC, a company owned by Merit Energy Co, has agreed to acquire 100% of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc and 100% of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which hold the Fayetteville assets, for a total consideration of USD0.3 billion, less customary completion adjustments, payable at completion.
Both sales are subject to the satisfaction of customary regulatory approvals and conditions precedent, and BHP expects completion to occur by the end of October. The effective date at which the right to economic profits transfer to the purchasers is this past July 1.
BHP Chief Executive Officer Andrew Mackenzie, said: "The sale of our onshore US assets is consistent with our long-term plan to continue to simplify and strengthen our portfolio to generate shareholder value and returns for decades to come.
BHP expects to recognise an impairment charge of about USD2.8 billion post-tax or approximately USD2.9 billion pre-tax against the carrying value of the assets. The impairment charge will be recognised as an exceptional item in the results for the 2018 financial year.
BHP said it anticipates that the estimated income tax expense from the transactions will be approximately USD0.2 billion, and that the estimated cash tax payable will be less than USD0.1 billion after utilisation of carried forward tax losses held by the BHP US tax consolidated group.
Separately, BP said that, after integration of the acquisition with BP's existing US onshore business, the transaction will be accretive to BP's earnings and cash flow on a per share basis. BP expects the acquisition to be fully accommodated within its current financial frame, with organic capital expenditure in a range of USD15 billion to USD17 billion a year out to 2021 and gearing maintained within a 20-30% range.
Following completion of the acquisition, BP said intends to make new divestments of USD5 billion to USD6 billion, predominantly from the Upstream segment. The proceeds are intended to fund a share buyback programme of up to USD5 billion to USD6 billion over time. The divestments will be in addition to BP's ongoing programme of around USD2 billion to USD3 billion in divestments a year.
BP noted that the acquisition will significantly increase the liquid hydrocarbon proportion of BP's production and resources in the US onshore, to around 27% of production and 29% of resources from the current 14% and 17% respectively.
BP announced a second quarter 2018 dividend of 10.25 cents per ordinary share, an increase of 2.5%. This dividend is expected to be paid on September 21 to ordinary shareholders and American Depositary Share holders on the register on August 10. Holders of ADSs are expected to receive USD0.615 per ADS, less applicable fees.
