BP to Unload Draugen Stakes - Analyst Blog

BP Plc (BP) plans to divest its non-operated interest in the Draugen field in the Norwegian Sea to an affiliate of Royal Dutch Shell Plc (RDS.A) − AS Norske Shell. This $240 million, all-cash transaction is motivated by the British giant’s endeavor to concentrate on its core high-margin assets with a long-term growth potential.

The deal calls for the divestiture of BP’s entire 18.36% non-operating stake in the Draugen field to Shell, the net production of which averaged 6,000 barrels per day. The company expects the deal to complete by the end of this year, subject to regulatory approval.

BP reaffirmed its commitment to its Norwegian ventures that also include the start-up of Skarv and the redevelopment of Valhall. These are expected to boost its Norwegian production to more than double, reaching 60,000 barrels of oil equivalent per day. The company will continue to operate 11 licenses of its total 15 in Norway, of which 4 are currently in production.

The British behemoth is a major investor in Norway and aims to expend net $10 billion over the next five years in Norway and UK. The Skarv project is expected to generate for 25 years and will likely be an important center for BP in Norway. The project involves new floating production storage and offloading vessel in the Norwegian Sea.

On the other hand, the Valhall re-development project comprises the installation of a new platform that will facilitate in extending production from the field out to 2050. Again, the Ula field is expected to produce until 2028.

BP’s ongoing negotiations are in line with its divestment program that sees the British major getting rid of its mature, non-core upstream assets to create a portfolio with stronger growth potential from a smaller base.

BP is set to divest around $38 billion worth of assets by 2013, of which it has already announced disposals of $33 billion.

Recently, the company has entered into an agreement with oil and gas producer Plains Exploration & Production (PXP) to sell oilfields in the Gulf of Mexico for $5.5 billion.

BP carries a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.
 

 
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