HEARD ON THE STREET: BP's Need For An Orderly Asset Sale

By Matthew Curtin A DOW JONES COLUMN If you've got to flog $10 billion in upstream oil and gas assets, this isn't a bad time to do it. Demand for hydrocarbon assets is buoyant. Oil prices are holding up around $77 a barrel. Global energy consumption is rising again after a rare dip last year. So BP should be thankful for small mercies. Orderly asset sales to finance a $20-billion oil-spill claims fund would demonstrate the UK oil giant has regained some control over its destiny. BP should find no shortage of potential buyers. Upstream transactions this year are worth $67.8 billion, roughly 50% above the first half of 2008 and 2009, according to research group IHS Herold. Chinese national oil companies alone spent nearly $25 billion in the past year, far above previous years, according to Wood Mackenzie. Valuations are rising. Royal Dutch Shell paid $5 billion for US natural gas explorer East Resources in May barely a year after KKR invested $350 million for a substantial stake. BP has the advantage of a huge upstream portfolio. The $8 billion in additional disposals on top of the $2 billion it had planned before the Gulf of Mexico accident are a small fraction of roughly $200 billion in upstream assets. For now, BP says only non-core assets are up for sale. Likely among them are a 1.4% stake in Russian energy group Rosneft, with a market value of around $1 billion, and a 60% stake in Pan American Energy, an Argentine group valued at $9 billion by Merrill Lynch, BP might yet opt to farm down - rather than sell outright - some of its more precious upstream assets. ENI and Total, BP's partners in offshore Angola, would jump at the chance to increase their exposure to the region. Selling some Gulf of Mexico assets, among BP's most valuable, might be politically expedient too and provide good entry points for foreign oil companies wary of trying to buy US energy companies outright. BP may follow the example of ConocoPhilips'$10-billion disposal program, aimed at putting various assets up for sale but selecting only those that fetch high bids. Or BP could target buyers for particular assets. Either way, the more BP can sell assets on its own terms, the more it will restore confidence in its long-term future. (Matthew Curtin has been a financial journalist since 1990. He has written on international finance and business - from South Africa, Singapore and France - since 1994. He can be reached at +331 4017 1746 or by email: matthew.curtin@dowjones.com) TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackEurope@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments. (END) Dow Jones Newswires June 23, 2010 05:02 ET (09:02 GMT)