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BP Puts GOM Fields Up for Sale

BP plc, still coming to terms with the devastating Macondo well blowout two years ago, said Tuesday it is selling one Gulf of Mexico (GOM) field and stakes in four others.

The five fields yielded a total of about 55,000 boe/d in production during 2011, said CFO Brian Gilvary, who spoke with financial analysts during an earnings conference call. Although Gilvary did not provide an estimate of how much BP hoped to make from the sales, the proceeds would be added to BP divestments that now total almost $23 billion since 2010, he said. GOP properties that are up for sale are:

BP is the largest leaseholder in the GOM deepwater with more than 650 leases in water more than 1,250 feet deep.

The London-based producer "remains on track to start up six...major new upstream projects in 2012," including Galapagos in the GOM, with an expected start up by the end of June, according to the company. BP also is progressing phase two of Mad Dog in the GOM; a final investment decision is expected next year.

Five deepwater rigs are operational on BP-operated fields in the GOM; two are undertaking appraisal, two are producing; one is plugging a well and one is abandoning a well. BP expects to have eight rigs operating before the end of the year, which would be more than it had in the deepwater pre-Macondo.

"We will be seeing higher levels of activity in the Gulf of Mexico later this year with the most rigs we've ever run," said Gilvary. "We are ramping up activity and hiring people. Most of our activity is on track."

BP underperformed its peers in 1Q2012, mostly because it has been selling a long list of assets in the past 24 months to pay for the GOM damages, which in turn has cut into not just profits, but into production levels, Gilvary said.

Through billions of dollars in asset sales BP now is financially stable to withstand costs from Macondo-related issues and litigation, but the producer will need time to recapture gas and oil output lost that eventually will be recaptured in new projects and from new assets -- such as the recent acquisition in the Utica Shale.

Dudley stressed that BP remains focused on "value" over "volumes," a strategy unveiled last year when the company reached an "operational turning point" (see Daily GPI, Oct. 26, 2011). However, in a staff e-mail, the CEO said the divestments had taken a toll on output, along with industry cost inflation.

Net profits fell to $5.92 billion in 1Q2012 from $7.25 billion in the year-ago period. Revenue jumped to $96.7 billion in the latest period, versus $88.44 billion for the same period of 2011. BP's clean replacement cost profits (adjusted costs), which strip out gains/losses from inventories and other nonoperating items, fell 12.8% year/year to $4.8 billion from $5.5 billion.

Overall production fell 3% from a year ago to 3.47 million boe/d from 3.58 million boe/d. However, looking back to the first quarter of 2010 -- the last period before the Macondo failure -- BP produced 4.01 million boe, which was 13.4% more than the latest quarterly production figures.

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