BP Sells $1.3b in assets to Apache

BP Sells $1.3b in assets to Apache

Dow Jones, London

BP PLC said Monday it is selling a North Sea oil field, and oil and gas assets in the Gulf of Mexico to the U.S.'s Apache Corp. for $1.3 billion in cash, a move analysts took as a sign the world's third biggest oil company is focused on financial returns rather than production growth.

The blockbuster transaction, which involves the North Sea Forties Field that was once one of BP's crown jewels, is the first major disposal of what observers envisage could be a $3 billion sale of production assets by the end of 2003.

BP signaled an aggressive shakeup of its globe-girdling asset portfolio last quarter, after being embarrassed by three downgrades in its oil and gas production targets over two months. The revisions shook investor confidence and prompted its shares to fall almost 14 percent.

Analysts expected BP to wield the scythe, but there was still surprise that Forties was among the first fields cut. The field is BP's biggest oil discovery in the North Sea. During the early 1980s, it gushed almost 500,000 barrels of oil a day, second only to the company's mighty Prudhoe Bay operation in Alaska.

Forties' output today is a mere 48,000 barrels of oil equivalent, BP said. The company has a 96 percent working interest in the field.

BP remains the largest oil and gas producer in U.K. North Sea with daily output of 748,000 barrels of oil equivalent, more than 20 percent of its worldwide production of 3.5 million barrels of oil equivalent, the company said.

The company is transferring daily production of 119,000 barrels of oil equivalent and proven reserves of about 240 million barrels to Apache.

Apache said Forties and the Gulf of Mexico assets, which include small equity stakes in 61 shallow-sea fields, will see its production jump 29 percent based on 2002 output.

For BP, the sale will boost upstream returns by cutting operating costs and freeing up capital for investment in other, more profitable projects.

It also liberates the company from potentially onerous costs attached to dismantling and carting away Forties' five platforms when the wells run dry around 2020. That liability - now transferred to Apache - is estimated at 400 million pounds, according to a decommissioning expert.