BP’s Chopping Block: Next Up, Brazil’s Polvo Field

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August 23, 2012

(Bloomberg) — BP Plc, the energy company that paid $3.2 billion last year to start exploring off the coast of Brazil, plans to sell its only producing oil field in the country, said two people with knowledge of the sale.

BP wants to focus on its discoveries in the deep waters of the Campos Basin and exit Polvo, a field closer to the coast of Rio de Janeiro, one of the people said, citing comments made by Guillermo Quintero, the head of BP in Brazil, at a private lunch in Rio yesterday. Another person with knowledge of the planned sale said BP started notifying other oil companies of its plans to sell Polvo about a month ago. Both people declined to be named as BP hasn’t made a public announcement yet.

Mark Salt, a spokesman for London-based BP, declined to comment about the status of Polvo when contacted today by telephone. Polvo, which BP operates with a 60 percent stake, yielded 9,791 barrels a day of oil and natural gas for the company in June, according to the website of Brazil’s oil regulator.

The Polvo sale is part of BP’s global strategy to reduce oil-exploration acreage, Quintero said yesterday, according to the person present. Chief Executive Officer Bob Dudley has completed about 70 percent of the $38 billion of asset disposals targeted by the end of next year, shrinking BP after the accident at its Macondo well, the worst offshore spill in U.S. history, wiped out a third of its market value.

Production Assets

“There haven’t been many production assets on the market, so that’s what is unique about it,” Bob Fryklund, vice president of energy consulting firm IHS CERA Upstream Research, said in a telephone interview from Houston. “With no bid rounds you have a fair amount more demand than supply.”

Brazil hasn’t auctioned any offshore permits since announcing the potential of the so-called pre-salt zone in 2007, the largest discoveries in the Americas since 1976. The country hasn’t sold any blocks at all since 2008, when it sold tracts on land.

BP paid Devon Energy Corp. $3.2 billion last year for exploration areas in Brazil’s Campos, Camamu-Almada and Parnaiba basins. This year BP acquired stakes in four blocks off the northeastern coast from Petroleo Brasileiro SA, Brazil’s state- controlled oil company, according to the country’s oil regulator. Terms of the deals weren’t made public.

Maersk Oil, a unit of A.P. Moeller-Maersk A/S, is BP’s partner at Polvo with a 40 percent stake that it bought as part of a $2.4 billion acquisition of SK Energy Co.’s assets in Brazil. Maersk announced the SK Energy purchase in December 2010. Polvo is near shallow-water blocks controlled by Billionaire Eike Batista’s OGX Petroleo e Gas Participacoes SA.

BP dropped 0.4 percent to 445.45 pence at the close in London. The stock has fallen 3.3 percent during 2012.

-By Peter Millard, Juan Pablo Spinetto and Rodrigo Orihuela. Copyright 2012 Bloomberg.

Cover Photo: Shutterstock

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