By swapping about $2.2 billion of its own shares for a stake in one of the emirate’s largest onshore oil concessions, BP Plc cemented its 77-year relationship with Abu Dhabi.
The London-based company said in a statement that giving the emirate a 2 percent holding in BP, the Bottom of Form
U.K.’s second-biggest oil group will issue new ordinary shares to pay for 10 percent of the Abu Dhabi Company for Onshore Petroleum Operations Ltd.
The media reported citing two people with knowledge of the matter said, asking not to be named before a formal announcement, that Abu Dhabi investor Mubadala Development Co. is likely to hold the BP shares.
Following a downturn that has forced the industry to slash billions of dollars of investments worldwide in the past two years, the agreement promises BP additional cash flow and revenue. Maintaining a balance sheet that has seen debt and leverage rise during the oil-price collapse and preserving its own cash would be possible for BP by the payment in shares.
“The economics are good for us and for our shareholders, and for BP it brings a strategic partner,” Chief Executive Officer Bob Dudley said in an interview in Abu Dhabi. “This agreement will provide BP with long-term access to significant and competitive resources that we already understand very well.”
Dudley said that in addition to the 95,000 barrels BP now produces in Abu Dhabi, the deal will provide an output of 160,000 barrels a day. BP said that with total resources of as much as 30 billion barrels of oil equivalent, the 40-year concession includes the Bab, Bu Hasa, Shah and Asab fields.
“What the majors bring is how to deploy technologies and also how to manage and organize large scale projects,” Robin Mills, chief executive officer of Dubai-based oil consultant Qamar Energy, said. “It always made sense that Abu Dhabi will look for another partner” for the Abu Dhabi onshore fields. More major oil companies could come in, he said.
BP said that Japan’s Inpex Corp. has 5 percent and South Korea’s GS Energy 3 percent and France’s Total SA owns a 10 percent stake in the Abu Dhabi onshore concessions. To take the remaining 12 percent of the 40 percent reserved for overseas oil companies, the Abu Dhabi National Oil Company is still looking for partners.
It would be made one of BP’s biggest shareholders by Abu Dhabi’s 2 percent stake. Owning 1.7 percent is Kuwait, which along with the United Arab Emirates is a member of the Organization of Petroleum Exporting Countries. The new shares will be priced at 447 pence a share, the British company said.
According to the statement, BP has held a 9.5 percent stake in the company that operates the onshore fields since the 1970s and has been present in Abu Dhabi since 1939. In 2016, Abu Dhabi started negotiating partnerships again after the concession expired in 2014. BP also has stakes in offshore fields and a gas liquefaction company.
(Adapted from Bloomberg)
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