BP may have to sell some of its most-valued assets, including a stake in the biggest US oilfield, to pay clean-up costs, fines and legal damages from the largest offshore spill in US history.
The 26 per cent stake in Prudhoe Bay on Alaska’s North Slope and other BP assets could attract suitors such as China National Petroleum, Occidental Petroleum and Hess Corporation, said Douglas Ober, chief executive officer at Petroleum & Resources Corp. in Baltimore, the oldest US oil fund.
“BP is going to have to look to other assets to pay for this mess they’re creating,” said Ober, who oversees a combined $1.6 billion at the fund and Adams Express Co. “They won’t be able to use any of that cash flow to expand production or add to reserves, and that’s really going to put them in a bind.”
BP lost 31 per cent of its market value since an April 20 fire in the Gulf of Mexico killed 11 workers, sank a $365 million rig and triggered sub-sea leaks that have spewed millions of gallons of crude into the Gulf. The company has spent more than $1 billion trying to staunch the leaks and remove oil from the ocean. Ober sold all of his BP stock after 15 refinery workers perished in a 2005 explosion at the company’s Texas City plant.
Asset sales by BP are more likely than a takeover of the company because it’s too soon to estimate how much the spill and its aftermath will end up costing, said Gianna Bern, founder of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, and a former BP crude trader.
“A potential investor would think twice because this is unprecedented and it would take a decade to sort out liability and any potential litigation,” Bern added.
BP, the largest oil and natural-gas producer in the US region of the Gulf of Mexico, is facing criminal and regulatory probes into the causes of the disaster at its deep-sea Macondo well drilled with Transocean Ltd’s Deepwater Horizon rig.
US senators Ron Wyden of Oregon and Charles Schumer of New York said the company should suspend dividend payments until clean-up and liability costs are determined. A payout would be “unfathomable” until the obligations are tallied, they said. The company paid $10.5 billion in dividends last year, according to its annual report.
BP’s latest attempt to contain the leaks stalled yesterday when a saw blade attached to a sub-sea robot snagged while cutting the pipe from the well. BP wants to sever the pipe to install a device that will divert the crude to a ship on the surface.
