BP Signals Intent for Portfolio Shift

Following an aggressive divestiture program in 2010 following the Horizon oil spill disaster, BP made two major deals that signalled their intent for where the new focus of their portfolio will lie. The first deal was in Russia and involved an equity swap agreement with Rosneft that would result in BP gaining access to huge exploration fields in the Russian Artic. Whether the deal will go ahead however is currently in doubt due to TNK-BP successfully claiming that the deal violates an existing agreement between the two parties.

The second deal which proved to be the largest E&P deal from any company during the quarter, saw BP acquiring a 30% interest in 23 offshore Indian fields from Reliance Industries for $7.2 billion. Reliance were keen to gain BP as a partner due to their vast experience in deepwater drilling, while BP sees India as a major future growth market.

BP weren’t the only major to undertake a portfolio rationalisation during the quarter. Total, ConocoPhillips and Repsol-YPF all divested stakes that they held in subsidiaries for a combined total of $10 billion. ConocoPhillips completed the sale of its holdings in Lukoil with the remaining 6.6% stake sold on the open market for $3.3 billion. ConocoPhillips plans to use the proceeds for a programme of debt reduction and share buybacks. Total divested their entire 48.83% stake in CEPSA to U.A.E. based company, International Petroleum Investment Company for $5.1 billion which will make IPIC the sole owner of the company. The sale by Total was an implementation their strategy to reduce exposure to European refining which has experienced a drop in margins since the global economic downturn. Whilst Repsol-YPF sold a total of 10.5% of YPF for $1.7 billion in three separate transactions, including the flotation of an additional 6.67% of the company as American Depositary Receipts. Repsol has been steadily decreasing its stake in YPF, and aims to reduce its final holdings in its subsidiary to just over 50%. The proceeds of which are earmarked for their “Horizon 2014” plan, which includes the accelerated development of Latin American development projects such as their Brazilian pre-salt resources.

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