BP's Hayward seeks help in Abu Dhabi
Thursday, July 8, 2010
BP's chief executive Tony Hayward met with Abu Dhabi's crown prince Wednesday while BP's investment bankers worked to raise money without shedding any of the company's crown jewels.
Hayward is looking to shore up BP's standing with foreign partners, investors and host countries. In recent visits to Russia and Azerbaijan, he reaffirmed the company's commitment to exploration projects there, and he told reporters in the United Arab Emirates Wednesday that he had a "very good" meeting with the crown prince, Sheik Mohammed bin Zayed al-Nahyan. Hayward heads next to Angola, where BP has deep-water offshore exploration and production projects.
Meanwhile, the company is also looking to shore up its finances, pressing ahead with plans to raise $7 billion to $10 billion by selling "non-core" assets over the next year.
Industry sources familiar with the negotiations said this week that investors -- including U.S. and European oil firms, BP's Russian partners, and one of China's state oil companies -- have been approached about buying BP oil and gas production assets in countries including Argentina, Venezuela, Vietnam, Indonesia and Algeria.
BP also may look to sell some of its 35 percent interest in Alaska's aging Prudhoe Bay field, some sources said, though others said the company would not want to do anything to raise fears that it is reducing its U.S. exposure. The sources spoke on condition of anonymity because the talks are private.
Brian Youngberg, an oil analyst with Edward Jones, said that BP has sold an average of $2.5 billion a year of assets over the past three years as part of the normal repositioning strategy. "Companies routinely buy and sell assets," he said. "This would be just a bit more than normal."
"BP will have no trouble selling these assets," said Fadel Gheit, an oil analyst with Oppenheimer & Co. China, which is expanding oil holdings worldwide, might want reserves in Venezuela or Asia. Gheit also said that Exxon Mobil might use the opportunity to try to buy minority positions in some of BP's extensive holdings off the coast of West Africa.
BP's assets in Argentina may be the most likely to go. When it bought Amoco, BP acquired 60 percent of a venture that has boosted output from an aging field, which now produces 100,000 barrels a day of oil and 450 million cubic feet a year of natural gas. Gheit said other oil companies with fields in Argentina might be able to operate BP's fields profitably because of economies of scale.
BP denied reports that it was looking for a sovereign wealth fund to take a big equity stake in the company, much as Middle East investors propped up the shares of beleaguered U.S. financial firms by taking substantial minority stakes. But BP spokesman Andrew Gowers said that "we are talking to investors about the attractions of coming into BP at current attractive prices." He said Hayward's message was "we welcome new shareholders on our register or existing shareholders who see an opportunity to top up."
Abu Dhabi's crown prince is also head of the emirate's sovereign wealth fund.
Sovereign funds are already big BP shareholders. They include the government of Norway, which reported on May 1 that it bought a 1.7 percent stake; the People's Bank of China with 1.1 percent; the Government of Singapore Investment Corporation with 1.07 percent; and the Kuwait Investment Authority with 1.75 percent.
In a strong day for stock markets, BP jumped $1.28 a share, or 4 percent, to $33.19 a share on the New York Stock Exchange. But uncertainty remains over the upper limit of BP's legal liabilities. Sanford C. Bernstein investment analysts said this week that the oil spill disaster could cost the company $33 billion.