BP to Sell Assets for $7 Billion to Apache

A BP gas station
Last updated at 6:38 p.m. ET

BP PLC said Tuesday it is selling assets in the U.S., Canada and Egypt to Apache Corp. for $7 billion to help pay the costs from the Gulf of Mexico oil spill.

Some or all of the proceeds will go towards a $20 billion fund that BP agreed to last month under pressure from the Obama administration. The fund will help pay cleanup costs and damages from the spill.

As the spill escalated in the weeks after the explosion of the BP-operated rig Deepwater Horizon, BP realized it needed to bolster its available cash. The company suspended dividend payments of about $10.6 billion for this year. And it said it would speed up plans to sell $10 billion in assets. Apache eventually emerged as a potential buyer.

Special Section: Disaster in the Gulf

BP has spent about $4 billion so far on containing and cleaning up the oil, as well as on damage claims from Gulf businesses.

BP earned $166 million last year from the sale properties, which are considered to be past their peak. But that shouldn't be a problem for Apache, which under Chief Executive G. Steven Farris has gained a reputation for buying mature fields and finding a way to boost production, said Argus Research analyst Phil Weiss.

BP shares rose almost 3 percent in after-hours trading while Apache shares dropped about 3 percent. Apache announced separately that earnings nearly doubled in the second quarter to $860.2 million, or $2.53 a share and that it plans to sell 21 million common shares and $1.1 billion of preferred shares to the public.

BP PLC said Tuesday it plans to sell company assets in Vietnam and Pakistan to help pay for the oil spill in the Gulf of Mexico.

A spokesman for the British oil giant told The Associated Press that the company has notified the governments of both countries about its plans.

Spokesman David Nicholas says the company hasn't received any offers yet for the assets.

BP Chairman Carl-Henric Svanberg, while not identifying other properties for sale, said BP's board "believes that there are opportunities to divest assets which are strategically more valuable to other parties than they are to BP."

BP must contribute $5 billion of the $20 billion for the compensation fund this year. BP spokesman David Nicholas said all $7 billion from the Apache deals may not go to the fund. Apache has agreed to give BP a $5 billion cash deposit on July 30.

BP said the assets include:

Oil fields and gas processing plants in Texas and southeast New Mexico worth $3.1 billion;

BP's upstream Western Canadian gas business for $3.25 billion;

Oil exploration and production assets in Egypt worth about $650 million.

Argus' 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.

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

The companies must wait for government and regulatory approvals to complete the sales. BP said it expects the deals to be completed during the third quarter.