Melbourne-based BHP, the world’s top miner, will also sell its Fayetteville operation to a unit of Merit Energy Co for about US$300 million to complete its exit from the shale sector, the company said Friday in a statement. The deals are expected to be completed by the end of October.
Rising oil prices have boosted prospects for shale sector deals, while the Permian – the most-prolific North American oil field – is a focus for industry consolidation as technological advances allow explorers to drill ever-longer sideways wells. Concho Resources Inc agreed in March to acquire RSP Permian Inc in an US$8 billion, all-stock transaction.
“This is a transformational acquisition for our Lower 48 business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio,” BP’s Chief Executive Officer Bob Dudley said in a statement.
BP was among as many as 60 companies that participated in the first round of bidding for BHP’s assets, Dudley said in June. BHP also drew initial offers from separate partnerships headed by Chevron Corp and Royal Dutch Shell Plc, people familiar with the process said in June. The seller had expected to receive about US$10 billion or more in a single deal for the entire unit, or as much as US$13 billion for piecemeal sales, according to the people.
BHP will recognise a US$2.8 billion impairment against the onshore unit in financial results next month and expects to return net proceeds from the sales to investors, the company said. The sale “is consistent with our long-term plan to continue to simplify and strengthen our portfolio to generate shareholder value and returns for decades to come,” BHP’s CEO Andrew Mackenzie said in a statement.
The mining giant disclosed plans to sell its onshore US division last year after activist investor Elliott Management Corp said the company’s foray into shale, along with other decisions, had wiped out US$40 billion in shareholder value. A US$20 billion spree on two US oil and gas acquisitions in 2011 had been too costly and poorly timed, while the shale unit didn’t deliver expected returns, CEO Mackenzie said last year.