BP (NYSE: BP) announced the purchase of shale assets from a struggling mining giant BHP Billiton (NYSE: BHP) for a record sum of $10.5 billion. Through this purchase, BP will regain access to Permian Basin reserves, which they disposed of after the Deepwater Horizon disaster in 2010. This is the biggest acquisition BP has finalized since 1999.
With this purchase, BP will increase its US onshore oil and gas resources by 57%, acquiring 470,000 acres of land. The company will intensify operations in the Permian Basin, a sedimentary basin located in West Texas and New Mexico. BP will work together with Exxon Mobile (NYSE: XOM) and Chevron (NYSE: CVX), among others. Additionally, the purchase gives BP access to Eagle Fort and Haynesville oilfields, rendering BP the owner of the most productive acreage in the onshore US.
"This is a transformational acquisition for our (onshore US) business, a major step in delivering our upstream strategy and a world-class addition to BP's distinctive portfolio," according to the statement released by the BP CEO Bob Dudley. It is a pivotal moment for a company, which has struggled with charges and penalties totaling $65 billion related to Deepwater Horizon. To showcase its latest performance, BP also announced a share buyback to be financed mainly by the disposition of some upstream assets.
It seems the oil giant has finally overcome the consequences of the Deepwater Horizon disaster, which spilled 4.9 billion barrels of oil into the Gulf of Mexico and holds the title for the largest marine oil spill in the petroleum industry's history. Now, BP wants to send the message of safer producer with a "fit for the future" attitude. In its strategy proposition for 2018, Bob Dudley praised the company for its turn towards solar energy through a partnership with one of Europe's largest solar development companies, Lightsource. In the course of 3 years, the company plans to invest $200 million and acquire a 43% stake in the solar leader.
BP's acquisition of shale reserves is not unique. Due to rising oil prices and a positive outlook for the industry, the smaller players are tending to get rid of their natural gas reserves and intensify oil extraction. It is happening with Chesapeake natural gas fields in Ohio, which Chesapeake Energy Corporation (NYSE: CHK) is selling to Houston-based Encino Acquisition Partners for $2 billion. Chesapeake wants to improve its balance sheet with this move and invest in oilfields in Wyoming. The case is not exactly parallel to struggling mining giant BHP, however, which needed to sell its shale assets in response to constant pressure from activist investors like Elliott Assets Management. The Anglo-Australian BHP described its onshore US assets as a "costly and mistimed investment." The possession of this assets led to $4.9 billion impairment charge write-down in 2016 due to low oil prices. In total, BHP lost around 19 billion USD in this investment.