British oil giant BP Plc (BP) agreed to divest its fuels marketing businesses in five southern African countries for $296 million to Puma Energy, subject to certain post-completion price adjustments. This move is reflective of the distressed oil major’s constant endeavor to raise $25–$30 billion by the end of 2011 to pay off its Macondo oil spill related charges.
The sale includes BP’s fuels marketing businesses in Namibia, Botswana and Zambia as well as 50% interest in both BP Malawi and BP Tanzania to Puma Energy, subsidiary of Amsterdam-based commodities trader Trafigura Beheer B.V. However, it excludes BP’s refining and marketing businesses in Mozambique and South Africa.
The businesses supply commercial and aviation fuel along with lubricants, and include almost 190 service stations across the five countries. They also own and operate storage depots, an import terminal in Namibia, and employ a total staff of 402 employees.
The divestiture is expected to close by this year at Botswana and through 2011 in the other countries, pending certain regulatory approvals. BP also confirmed that Angola’s state-owned petroleum company, Sonangol (Sociedade de Combustíveis de Angola), plans to take a 10% stake in Puma’s acquired businesses.
With the present sale of its southern African business unit, BP is well on track with its planned divestment target of $30 billion and subsequently reducing debt by $10–$15 billion by the end of 2011. However, the company’s total divestment program accounts for only a minimum number of its total reserves and we believe that its production volumes will slowly gain traction in the near to medium term.
BP, which has a 65% interest in the Macondo well, has not received any payment from its partners Anadarko Petroleum Corporation (APC) and Mitsui & Co. Ltd. (MITSY), which have a respective 25% and 10% interest. Despite incurring massive spill-related costs in the third quarter, we believe that the long-term fundamentals of BP remain strong based on its third quarter performance and efforts toward the targeted $30 billion asset divestiture program.
We, thereby, retain our long-term Neutral recommendation on the company. BP holds a Zacks #3 Rank (short-term Hold rating).
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