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BP will strengthen its finances

12 July 2010

BP has plans to sell worldwide assets to help pay for the clean-up and compensation claims following the Deepwater Horizon rig explosion in the Gulf of Mexico last April. The costs for the clean-up have passed the $3 billion mark and the company has been forced by the US authorities to create a $20 billion fund to cope with future bills. BP is looking for investors to help fend off any potential takeover attempts, which may be launched while the company’s shares have slumped to a 13 year low.

Tony Hayward is not taking round the begging bowl
Tony Hayward is not taking round the begging bowl

Chinese investors could come to the rescue by buying up to $9 billion worth of energy assets in South America, raising vital money for BP to pay bills from its Gulf liabilities. The Russian management of the TNK-BP joint venture, based in Moscow, has also said that it would like to buy more assets from the beleaguered company in other parts of the world.

Media reports suggest that China National Offshore Oil Corporation (CNOOC) has expressed an interest in buying the 60% stake held by BP in Pan American Energy, Argentina's fastest-growing oil and gas group. CNOOC recently bought a 20% stake in Pan American Energy for $3 billion and is apparently keen to increase that holding to 80%. Chinese oil companies, which are partly state-owned, have been avid buyers of energy assets around the world in an effort to feed the country's rapid industrialisation programme. The Kremlin has also made no secret of its desire to see Russian oil companies spreading their influence worldwide.

Chief Executive Tony Hayward recently visited the Middle East in what has been described by a BP spokesman as a general series of visits to important partners. The company appears to be seeking the support of foreign sovereign wealth to combat the collapse in its share price. Securing the support of sovereign wealth funds could stave off a possible takeover bid from a major competitor such as Exxon, Shell or Total.

During his visit, Hayward met representatives of one of the world's largest sovereign wealth funds, the Abu Dhabi Investment Authority. It seems likely that one of the discussion topics was the deal which BP has with Abu Dhabi National Oil Company, which is currently up for renewal. BP issued an open invitation by an announcement in the local press that Hayward would meet any potential investors while in the Middle East if asked.

BP executives have held talks with a number of other sovereign wealth funds including Kuwait, Qatar and Singapore. But a company spokesman squashed any suggestion of an equity offering by explaining that Hayward was not travelling the world with a begging bowl asking for contributions. BP was not preparing an equity offering but keen that people appreciated BP’s value. The company has no plans to sell shares to raise funds but hopes to raise $10 billion from asset sales this year as part of its plan to fund the $20 billion clean-up fund.

Although Hayward’s Middle East trip seems to have all the hall marks of a closing down sale, his busy schedule is intended to strengthen BP’s finances during these troubled times and take the company out of take-over territory.

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