BP Plc’s (BP) $7.06 billion worth deal involving the sale of its holding in an Argentine crude-oil producer has been called off, citing inability by a buyer to win required regulatory approvals. The stake was supposed to be divested to a joint venture (JV) between Argentina’s Bridas Energy Holdings Ltd. and China’s CNOOC Ltd. (CEO).
Looking back, BP had agreed to sell 60% of its stake in Pan American Energy (PAE), the second largest producer of oil and gas in Argentina, to the recently formed JV. The completion date for the divestiture was set at November 1.
Bridas Energy was solely responsible for obtaining the required approvals from the Argentine antitrust agency and the Chinese government, but it was unsuccessful in keeping its commitment. BP then cancelled the contract as each party had the right to do so without notice after November 1, in case of any dissatisfaction with the conditions.
Following the collapse of the pact, the BP-Bridas alliance has gone sour. While BP has blamed Bridas of failing to fulfill the regulatory requirements, Bridas stated its dissatisfaction with BP’s behavior.
BP will now also need to repay the deposit of $3.53 billion it had received when the deal was sealed at 2010 end. Notably, BP had held the amount as short-term debt.
This sale was a part of the divestiture scheme adopted by BP last year to raise funds to cover the cost of the Deepwater Horizon oil spill in the Gulf of Mexico. The deal was made at a time last year when oil prices were low and BP actually needed to make some divestment of properties.
Now, with no immediate need for cash and a considerable improvement in its financial strength, BP is considering all its strategic options regarding PAE. In fact, management said that it is glad to get back the long-term ownership of these valuable assets.
BP holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the stock.
BP PLC (BP): Free Stock Analysis Report
CNOOC LTD ADR (CEO): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment