British oil major BP has signed an agreement to acquire US onshore oil and gas assets from BHP Billiton Petroleum (North America), the wholly-owned subsidiary of BHP, for $10.5bn.
Under the terms of the deals, BP will acquire entire interests in the Eagle Ford, Haynesville, and Permian fields.
The Eagle Ford, Haynesville and Permian fields comprise approximately 526,000 net acres while the Fayetteville production in north central Arkansas consists of approximately 268,000 net acres.
The acquisition is part of BP’s plan to upgrade and materially reposition its US onshore oil and gas business.
BP group CEO Bob Dudley said: “This is a transformational acquisition for our Lower 48 business, a major step in delivering our Upstream strategy and a world-class addition to BP’s distinctive portfolio.”
According to BP, the assets have combined production of 190,000 barrels of oil equivalent per day (boe/d), and 4.6 billion barrels of oil equivalent (boe) resources.
Upon completion of the deal, BP plans to divest upstream assets worth $5bn-$6bn and use the proceeds to fund a share buyback program of up to $5bn-$6bn over time.
BP said that the divestments will be in addition to the existing program of around $2bn-$3bn divestments a year.
BHP CEO Andrew Mackenzie said: “Our priority with this transaction is to maximise value and returns to shareholders. In August 2017, we confirmed that we would seek to exit our US shale assets for value.
“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.
“With net debt currently toward the lower end of our target range of US$10 to US$15 billion, and consistent with our Capital Allocation Framework, we expect to return the net proceeds from the transactions to shareholders.”
BP expects the deal to significantly increase its onshore liquid hydrocarbon proportion in the US to around 27% of production and 29% of resources from the current 14% and 17% respectively.
BP upstream CEO Bernard Looney said: “This is a major upgrade for one of BP’s key Upstream regions, giving us some of the best acreage in some of the best basins in the onshore US. I believe our dynamic, highly-efficient team will be able to unlock the full potential of these assets.
“This will increase our target for free cash flow from the Upstream by $1 billion, to $14-15 billion in 2021, and provide opportunities for continuing growth well into the next decade.”