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BP Is Said to Near $6 Billion Sale of Gulf Assets to Plains

BP CEO Bob Dudley
Robert " Bob" Dudley, chief executive officer of BP Plc. Photographer: Simon Dawson/Bloomberg

BP Plc is in advanced talks to sell a group of oilfields in the Gulf of Mexico to Plains Exploration & Production Co., said two people with knowledge of the matter.

Plains is discussing a price of about $6 billion and may reach an agreement within days, said one of the people, who spoke on the condition of anonymity because the talks are private. The market capitalization of Houston-based Plains is about $5.2 billion and net debt was $3.05 billion as of June 30, according to data compiled by Bloomberg.

BP Chief Executive Officer Bob Dudley plans to sell $38 billion of assets by the end of next year and shrink the company after the accident at its Macondo well, the worst offshore spill in U.S. history, wiped out a third of its market value. London-based BP said in May that it plans to sell some “non-strategic” assets in the Gulf.

Plains, led by Chief Executive Officer Jim Flores, is spending about 69 percent of this year’s planned $1.6 billion capital budget at onshore fields such as the Eagle Ford in Texas, and in California. It has allocated 14 percent, or $234 million, in the Gulf of Mexico, where it plans to ramp up its deep-water Lucius oil discovery beginning in 2014, according to a Sept. 5 investor presentation.

“One thing Jim Flores is known for, when he makes a move it’s usually a pretty big move and he’s not reckless about it,” John White, who manages about $50 million in energy investments at Triple Double Advisors LLC in Houston including BP shares, said in a telephone interview. “He can hedge out the production from this and keep the lenders happy.”

Staying in Gulf

Plains sold its shallow-water Gulf assets to McMoRan Exploration Co. for $780.4 million in cash and stock two years ago and now owns 31.5 percent of that company.

BP prepared preliminary information for prospective buyers of Gulf assets including the Horn Mountain, Holstein, Diana Hoover and Ram Powell fields in the Gulf, two people with knowledge of the matter said last month.

Scott Dean, a BP spokesman, declined to comment. Hance Myers, a spokesman for Plains Exploration, didn’t immediately return phone calls and an e-mail seeking comment.

BP isn’t quitting the Gulf, where the Macondo disaster occurred, Brett Clanton, a BP spokesman, said in an Aug. 14 e-mail.

“No one should confuse our effort to sell these older, non-strategic assets, which we announced months ago, with our ongoing commitment to the Gulf of Mexico,” he said. BP intends to continue investing at least $4 billion annually in the Gulf over the next decade, Clanton said in the e-mail.

The Wall Street Journal reported the talks earlier today.

BP’s output in the Gulf is some of the most profitable in its portfolio, and Dudley has said he wants to focus more on the production hubs of the Thunder Horse, Atlantis, Mad Dog and Na Kika fields.

Competitors including Norway’s Statoil ASA are also looking to expand in the region, which offers relatively low taxes and easy access to the U.S. energy market.

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