British oil giant BP Plc (BP) has agreed to divest its 60% stake in Pan American Energy for $7.06 billion to partner Bridas Corporation, which holds the remaining 40% stake. The transaction is expected to be completed in the first half of 2011.
Pan American Energy is the second largest oil and gas producer in Argentina and Bridas is jointly owned by Bridas Energy Holdings Ltd. and China’s offshore oil and gas company CNOOC Ltd. (CEO).
BP has been aggressively searching buyers for its properties to meet massive oil spill costs, government fines and legal claims. In a similar transaction in July, the company sold its properties in the U.S., Canada and Egypt to Apache Corp. (APA) for $7 billion.
Following this, BP also sold its oil and gas exploration business in Colombia for $1.9 billion. In October, BP agreed to sell energy assets in Venezuela and Vietnam to its Russian joint venture TNK-BP for $1.8 billion. This month, BP sold stakes in several south African fuel marketing businesses to Puma Energy for $296 million. So far, the company has raised a total of $21 billion from various divestitures.
The previously announced $30 billion disposal program is likely to be completed by the first half of 2011. We believe BP’s risk-reward scenario is gaining momentum with the likely reinstatement of dividend payment in the fourth quarter of 2010.
Subsequent to the completion of the Pan American deal, BP will be more focused on Brazil and Trinidad as Latin American businesses. We believe this deal will help BP to land on a solid financial position next year. We maintain our Neutral recommendation for BP with the Zacks #3 Rank (Hold).
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