The Briefing Room
General Category => Science, Technology and Knowledge => Energy => Topic started by: Elderberry on October 12, 2019, 12:22:24 pm
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Houston Chronicle by Jordan Blum Oct. 11, 2019
BP said Friday it will file up to $3 billion in writedowns from selling legacy U.S. gas assets for less than what the British energy major had on its books.
BP said it plans to wrap up its $10 billion divestment program by the end of this year - earlier than expected - after agreeing to the undisclosed asset sales. BP already completed the biggest chunk of the asset sale program, agreeing in August to sell its Alaska assets for $5.6 billion to Houston-based Hilcorp.
The Big Oil firm announced the divestment program last year after it paid almost $10.5 billion to buy the Texas shale assets of Australia's BHP, giving BP entry into West Texas' Permian Basin, the Eagle Ford shale and more.
More: https://www.houstonchronicle.com/business/energy/article/BP-to-sell-legacy-U-S-gas-assets-take-up-to-3B-14514131.php (https://www.houstonchronicle.com/business/energy/article/BP-to-sell-legacy-U-S-gas-assets-take-up-to-3B-14514131.php)
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I cannot see where BP has added much value to anything it has touched in more recent decades.
Purchasing Arco and selling off Prudhoe Bay. Buying Amoco and executing Macondo. Buying BHP's US assets and ?
Their historical emphasis has been in 3rd world countries where others fear to tread.
When I worked the North Sea in the 80s, I recall the one jewel in its crown was the Forties field, which others characterized as "God's gift to BP"
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I cannot see where BP has added much value to anything it has touched in more recent decades.
Purchasing Arco and selling off Prudhoe Bay. Buying Amoco and executing Macondo. Buying BHP's US assets and ?
Their historical emphasis has been in 3rd world countries where others fear to tread.
When I worked the North Sea in the 80s, I recall the one jewel in its crown was the Forties field, which others characterized as "God's gift to BP"
Given all the divesture, wonder how long BP will be able to sustain the 6.7% return Divy.......
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Given all the divesture, wonder how long BP will be able to sustain the 6.7% return Divy.......
They are selling older assets to pay for:
BP pays $10.5 billion for BHP shale assets to beef up U.S. business
https://www.reuters.com/article/us-bhp-divestiture-bp/bp-pays-105-billion-for-bhp-shale-assets-to-beef-up-us-business-idUSKBN1KG34V (https://www.reuters.com/article/us-bhp-divestiture-bp/bp-pays-105-billion-for-bhp-shale-assets-to-beef-up-us-business-idUSKBN1KG34V)
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They are selling older assets to pay for:
BP pays $10.5 billion for BHP shale assets to beef up U.S. business
https://www.reuters.com/article/us-bhp-divestiture-bp/bp-pays-105-billion-for-bhp-shale-assets-to-beef-up-us-business-idUSKBN1KG34V (https://www.reuters.com/article/us-bhp-divestiture-bp/bp-pays-105-billion-for-bhp-shale-assets-to-beef-up-us-business-idUSKBN1KG34V)
And selling those assets and taking a $3bn loss means they have destroyed value on the assets.
Like I said, not much value-adding going on when you have to take a writeoff. With BP's recent track record, I think so.
It remains to be seen if the BHP asset purchase will translate into a similar debacle.
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BHP first acquired shale assets in 2011 for more than $20 billion with the takeover of Petrohawk Energy and shale gas interests from Chesapeake Energy Corp at the peak of the oil boom. It spent a further $20 billion developing the assets, but suffered as gas and oil prices collapsed, triggering massive writedowns.
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BHP first acquired shale assets in 2011 for more than $20 billion with the takeover of Petrohawk Energy and shale gas interests from Chesapeake Energy Corp at the peak of the oil boom. It spent a further $20 billion developing the assets, but suffered as gas and oil prices collapsed, triggering massive writedowns.
What BHP paid for Petrohawk and invested to develop Petrohawk assets and other shale interests is immaterial to whether BP takes a writedown on the sale of those assets.
The only reason for BP to take a writedown is what BP paid for those assets and its other investment decisions. It is something BP did, not what BHP did.
So BP destroyed value.
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They are selling older assets to pay for:
BP pays $10.5 billion for BHP shale assets to beef up U.S. business
https://www.reuters.com/article/us-bhp-divestiture-bp/bp-pays-105-billion-for-bhp-shale-assets-to-beef-up-us-business-idUSKBN1KG34V (https://www.reuters.com/article/us-bhp-divestiture-bp/bp-pays-105-billion-for-bhp-shale-assets-to-beef-up-us-business-idUSKBN1KG34V)
BP EPS diluted- $2.62/sh
BP Dividend= $2.46/sh
You have a lot of faith, because there is no margin of error here, or base for additional capital investment. They're basically hamstrung, or wanting to incur an insane debt load.