Apache Corp. on Friday was working on financing to secure a deal to buy some of BP plc's Alaska properties, and an announcement was expected as soon as Sunday or Monday, a source familiar with the discussions told NGI.
BP's work to secure the oil leak in the deepwater Gulf of Mexico (GOM) appeared to be inching toward a successful conclusion Friday. However, with the hit to its stock price and its reputation, the London-based major is said to want to deliver positive news to shareholders when quarterly results are announced on July 27. Good news regarding containment of the leak on Thursday caused BP shares to surge (see Daily GPI, July 16).
BP and Apache spokespeople declined to comment on possible transactions; rumors have swirled for more than a week (see Daily GPI, July 13). CNBC and other media outlets also reported Friday that financing plans were under way for Apache to secure some assets.
Two things are needed to make a transaction by Apache possible, a source told NGI. Apache has to be able to fund the deal; it is completing a cash-and-stock takeover of Mariner Energy Inc. worth close to $3 billion, and it recently completed a $1.05 billion deal to buy Devon Energy Corp.'s offshore assets (see Daily GPI, April 16).
Several sources said Apache was looking for a bridge loan of up to $7 billion. Apache also would have to clear the rights of first refusal with any of BP's operating partners in Alaska, which would have to be approved before any transaction moved forward.
"The hope had been that a deal could be announced as soon as this Monday," reported CNBC's David Faber, "but given the need to give certain partners of BP in these properties their right of first refusal, it is proving somewhat complex."
On Friday Tudor, Pickering, Holt & Co. Inc. (TPH) noted that the media was "all over [a] possible transaction," with a deal to be announced by Monday. TPH reported that Apache was to pay $10-11 billion for a "subset of BP's North Slope assets," which "fits perfectly" in Apache's "wheelhouse...buying large/mature fields and squeezing incremental value."
It's unlikely that BP would sell its entire Alaska portfolio for $10 billion, which would imply half of the recent book value, the TPH team noted days ago. BP's recent filings indicate that the exploration and production (E&P) business in Alaska generated $3 billion in earnings last year; its estimated book value of the Alaska E&P assets was $31 billion, including $12 billion of fixed assets.
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