BP sells Canadian assets to Apache

BP said Tuesday it is selling properties in Alberta and British Columbia worth $3.25 billion US to Apache Corporation to help pay for the cleanup and to cover compensation claims from its oil spill in the Gulf of Mexico.

The sale is part of a $7-billion asset deal with Apache.

The other properties include BP's oil and natural gas operations, acreage and infrastructure in the Permian Basin of West Texas and New Mexico for $3.1 billion, and in Egypt's Western Desert. The Egyptian assets sold for about $650 million.

The properties have total proven reserves equivalent to 385 million barrels of oil, of which the Canadian assets account for 224 million.

"We seldom have an opportunity like this in one of our core areas, let alone three," stated Steven Farris, CEO of Houston-based Apache. "This is a step change that will add muscle, enabling Apache to add value for decades to come through our demonstrated exploitation capabilities and exploration drilling."

BP agreed last month to set aside some assets as security while it builds up the $20-billion US compensation fund it promised the American government it would establish to pay for the damage caused by the massive spill at its ruptured oil well off the coast of Louisiana.

Tuesday's deal increases Apache's proven reserves in Western Canada by 42 per cent over the 531 million barrels it had at the end of 2009.

"We are buying a substantial production base and 1.3 million net acres (almost 5,300 square kilometres) that include significant positions in several emerging unconventional plays including the Montney, Cadomin, Doig and coalbed methane," Farris said.

Apache natural choice

Argus Research analyst Phil Weiss said Apache was a natural choice as buyer. The Houston company owns oil and gas assets near each of the properties BP is selling, so it has the staff and facilities in place to take them over.

BP earned $166 million last year from these properties, which are considered to be past their peak. But that shouldn't be a problem for Apache, which under Farris has gained a reputation for buying mature fields and finding a way to boost production, Weiss said.

The sale doesn't include BP's stake in Prudhoe Bay, contrary to published reports that said a deal with Apache for the Alaska field was in the works.

The deal, to take effect backdated to July 1, is subject to regulatory approval in Canada, the United States, Egypt and the European Union.

In after-hours trading, Apache shares were down by $2.28, or 2.6 per cent, at $86.00 US while BP stock rose 41 cents, or 1.2 per cent, to $35.61 US.