BHP’s sale of US onshore oil and gas assets
On July 26, BHP Billiton (BHP) announced that it entered into two separate transactions to exit its US onshore oil and gas assets presence. Its US (SPY) assets include Eagle Ford, Haynesville, Permian, and Fayetteville.
In the first transaction, BP plc (BP) is expected to acquire the Eagle Ford, Haynesville, and Permian assets for a total consideration of $10.5 billion, payable in cash. One-half of the consideration is payable at completion, and the balance would be payable in six equal installments over a six-month period.
The first of these installments is to be paid one month after completion. BP beat its rivals Royal Dutch Shell (RDS.A) and Chevron (CVX), which were also eyeing these assets.
In the second transaction, MMGJ Hugoton III, a company owned by Merit Energy Company, agreed to acquire BHP’s Fayetteville assets for $0.3 billion. This consideration would be payable at completion.
Both transactions are expected to be completed by the end of October. The effective transfer date of the rights to the economic profits is July 1.
Proceeds to go to shareholders
BHP’s CEO, Andrew Mackenzie, said, “Our priority with this transaction is to maximise value and returns to shareholders.” He added, “The sale of our Onshore US assets 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.”
Mackenzie noted that because BHP’s net debt is currently at the lower end of its target range of $10.0 billion–$15.0 billion, the company expects to return the net proceeds from these transactions to its shareholders.
In the next two parts of this series, we’ll see how BHP’s stock price reacted to this transaction and what analysts are saying about this deal.