Dominic Perkins, BP Project Manager, Mergers and Acquisitions, recently gave a presentation to the Aberdeen ELP group on “Asset Acquisitions and Divestments—Learning From BP’s North Sea Disposals.” Asset acquisitions have contributed to BP becoming the number two oil company in the world. BP has increased in value from a U.S. $70 billion to approximately $200 billion company, and much of this is attributable to acquisitions.
BP’s strategy consists of four elements:
- Create new profit centers.
- Build new profit centers, such as the Gulf of Mexico, Asia Pacific, Azerbaijan, Trinidad, Angola, and Russia.
- Maximize productivity in existing profit centers. Operations in the North Sea, Alaska, and BP’s North American gas position help fund activities in the rest of the world.
- Divest assets uncompetitive in the BP portfolio that are of more value to others with different investment criteria. Assets are selected for divestment by considering their strategic fit, financial performance, quality of investment options, and marketability to potential buyers.
Perkins explained acquisition and divestment terminology, walked the audience through the divestment process, and discussed associated issues. The three phases of the divestment process were explained in detail: marketing, sales, and purchasing agreement; execution/transition; and the project closeout. Some of the divestment-related issues raised included decommissioning and addressing the environmental side effects, complications associated with transfer of operatorship, and the involvement of joint-venture partners.
The North Sea, a maturing basin, is still a significant part of BP’s business. BP’s interest in the U.K. Continental Shelf (UKCS) represents 15–20% of its total asset base. During 2003, BP disposed of 20 of its operated assets in its North Sea asset base, representing an 11% reduction in BP’s North Sea production. The four major disposals in 2003 were:
- MonArb (Montrose/Arbroath): Three fields sold to Paladin. Disappointing performance compared to production targets prompted a close look at mature fields, and this was the first of a sequence of disposals to reshape the portfolio.
- Forties: One field sold to Apache.
- Bacton area: 14 fields, one terminal sold to Perenco. This was the most complex transaction ever undertaken in the UKCS.
- Gyda: One field sold to Talisman.
Perkins highlighted the following factors as crucial to the success of BP’s asset disposals campaign:
- People.
- Maintaining high health, safety, and environment standards.
- Transferring knowledge to new entrants to the area.
- Transferring a thriving business.
- Pragmatism and creativity.
