Azernews.Az

U.S Devon Energy Corporation on Thursday announced that it has reached the agreement with BP to sell its assets at $7 billion in the deepwater Gulf of Mexico, Brazil and Azerbaijan, Devon Energy's statement posted on website of the company said.
Devon Energy has 5.63 percent of share holding in the Azeri-Chirag-Guneshli (ACG) project. Thus, after completing the deal, the share of BP in ACG, which produces 820,000 barrels of oil a day, will increase to 39.77 percent. BP is the operator in this project. According to BP, its proven oil reserves exceed 7 billion barrels.
Other project participants include Chevron (10,2 percent), SOCAR (10 percent), INPEX (10 percent), Statoil (8,5 percent), ExxonMobil (8 percent), TPAO (6,75 percent), Itochu (3,9 percent), Delta Hess (2,7 percent).
In November 2009, Devon Energy announced its intention to sell its share in the ACG project, as well as all the international assets, including assets in the Gulf of Mexico, and focus on onshore projects in North America.
"This sale, combined with our previously announced divestitures of $1.3 billion of deepwater Gulf of Mexico assets, put Devon well on the way to completing its strategic repositioning," Larry Nichols, Devon's chairman and chief executive officer said. "Given any reasonable sales price for Devon's remaining divestiture assets, the transactions to date suggest that our total after-tax proceeds for the entire divestiture program will exceed our previously announced range of $4.5 to $7.5 billion," he said.
BP said on Thursday that it will pick up interests in 10 exploration blocks in Brazil, mostly in the Campos basin, Devon's stake in the Kakskida discovery in the Gulf of Mexico, a portfolio of deepwater exploration acreage in the Gulf of Mexico, and Devon's stake in the BP-operated Azeri-Chirag-Gunashli development in Azerbaijan.
BP has also agreed to sell Devon a 50 percent stake in its Kirby oil sands interests in Alberta, Canada, for $500 million and that the two companies would form a venture to develop Kirby.
The deal gives BP reserves and highly prospective exploration, mainly in the deep water offshore where it is an industry leader.
It follows a planned $4 billion deal by Exxon Mobil announced last year to buy a stake in an oilfield offshore Ghana as well as a $3 billion bid earlier this week by Royal Dutch Shell and PetroChina for Australia's Arrow Energy.
Analysts said the new fields will not significantly contribute to BP's production until after 2015, and they will help the company meet its goal of growing production at 1 to 2 percent per annum in the long term.
The companies did not put a figure on the reserves that BP was buying but Colin Smith at ICAP estimated that BP has bought 140 million barrels of oil equivalent (boe) of booked reserves, and analysts at Morgan Stanely estimated 160 million boe.
ING estimated recoverable reserves could eventually top more than 800 million barrels.
However, a BP spokesman said the deal was largely predicated on the exploration upside the fields offer.
Some of the best assets being bought, such as the Kaskida stake, are at the exploration stage of development and so have no booked reserves yet.
"Kaskida alone could be worth $6 billion," Richard Griffith at Evolution Securities said, referring to the whole field.
BP is buying around 240 leases in the Gulf of Mexico, including Devon's 30 percent interest in the major Kaskida discovery, in which BP already has a 70 percent stake.
The parties will form a 50-50 joint venture to develop BP's 90,000 net acres of oil sands at Kirby, and this will be operated by Devon.
ICAP's Smith said this could unlock the potential of Kirby, which has sat dormant in BP's portfolio for years, and would also help secure a crude supply for BP's Whiting refinery, in which it has been investing heavily in recent years.
BP should be able to fund the acquisition out of cashflows or debt, analysts said.
BP's gearing ratio was 21 percent at the end of 2009, against a targeted 20 to 30 percent range, while analysts believe the company is highly cash generative at current oil prices.
The cost of insuring BP's debt rose, with five year credit default swaps rising 5.5 basis points to 49.5 bps, according to Markit data.
Deutsche Bank advised Devon Energy on the sale while BP did not use an investment bank adviser. *