London-based BP PLC could emerge as the winning buyer for BHP Billiton Group's 800,000 net acres in the Permian Basin, Eagle Ford, Haynesville and Fayetteville shales.
BHP Billiton received the first round of bids for the shale assets from oil majors BP and Chevron Corp. and a consortium composed of Royal Dutch Shell PLC and Blackstone Group LP. Private equity firm Apollo Global Management LLC submitted separate bids for individual assets, according to a June 5 article from Bloomberg News.
While representatives from BHP, Shell, BP and Chevron declined to comment on the asset sale, Muhammed Ghulam, an analyst at Raymond James, said in a June 6 interview that BP seems like a natural fit to acquire the BHP assets.
In the last several years, many of the oil majors placed heavy bets on rising output and lucrative returns, dumping billions into shale investments.
Ghulam said that while Chevron already has a solid foothold in shale, BP sold off most of its Permian assets in 2010 to Apache Corp. to help defray the costs of damages related to the Deepwater Horizon explosion and oil spill in the Gulf of Mexico.
Despite rising oil prices and U.S. tax reforms lowering the corporate tax rate from 35% to 21%, Ghulam said the BHP assets are less attractive than they would have been several years ago, pointing to pipeline bottlenecks in certain regions that make it difficult to transport the oil to key hubs.
A second round of bids could be seen as early as July, and a sale, which could net $10 billion or more, could be announced by the end of the year. However, mining heavyweight BHP is also considering other options for its assets, including an IPO or a demerger.
The sale follows months of pressure from activist shareholder Elliott Management Corp. for sweeping changes to BHP, including the spinoff of its U.S. shale assets.
