UPDATE: BP May Sell Stake In Argentina's Pan American Energy -Source

25th Jun 2010 17:43

(Updates to add more details, background.) By Taos Turner Of DOW JONES NEWSWIRES BUENOS AIRES (Dow Jones)--BP PLC (BP, BP.LN) is actively considering the sale of its stake in Pan American Energy LLC, Argentina's fastest growing oil and gas company, a person familiar the situation said Friday. BP said in March that it would sell assets totaling between $2 billion and $3 billion. Citing challenges presented by the Gulf of Mexico oil spill, BP in June raised that figure to up to $10 billion, and said it planned to sell assets over the next year. A BP spokesman declined to say which assets the company might be interested in selling. "We're going through a process of identifying assets that we will sell or look to sell over the next 12 months," BP Spokesman Toby Odone said in London. "While that process is going on we won't talk about any of those assets." The person who confirmed BP's interest in selling its stake in Pan American asked for anonymity given the ongoing nature of the situation. In March the Argentine oil and gas company Bridas Energy Holdings, or BEH, confirmed that China National Offshore Oil Corporation Limited, or Cnooc (CEO, 0883.HK), would take a 50% stake in its Bridas Corporation subsidiary. The two companies struck a preliminary agreement for BEH, which currently owns all of Bridas Corp., to share strategic and management decisions with Cnooc subsidiary Cnooc International Limited. Cnooc said it would pay $3.1 billion for the 50% stake. Bridas has hydrocarbons operations in Argentina, Bolivia and Chile and is developing projects elsewhere in the world. Bridas' portfolio includes a 40% stake in Pan American Energy LLC, which operates in southern South America. The other 60% of Pan American is held by BP. Some have put the value of BP's Pan American stake at somewhere around $9 billion. Given Pan American's legal structure, Bridas would have a good deal of leverage over another potential buyer if BP decided to sell its stake, the person familiar with the potential sale said. Moreover, given the way things stand today, the most likely buyer would be Bridas itself. Bridas might be able to make the acquisition for substantially less than the $9 billion hypothetical value, the person said. Investment in Argentina's energy sector has largely been limited since the country's historic 2001-02 economic meltdown, when the government froze most oil, gas and electricity prices. The price caps have limited profit and led most companies to invest less in exploration and production, industry executives say. Since 1998, Argentina's crude oil output has fallen by 25% and it faces the prospect of becoming a net importer. Gas production has been declining since 2004. Oil and gas reserves also have declined and Argentina hasn't had a major discovery in 15 years, according to research done by eight former Argentine energy secretaries. But Pan American has bucked the investment trend and continued to invest in exploration and development despite the market difficulties. Earlier this year Pan American announced plans to invest more than $1 billion in 2010, most of that at its 50-year-old Cerro Dragon field in Chubut Province. Last year, Pan American invested $1.053 billion in Argentina, helping to boost its own production and reserves. In 2006, Pan American's oil and gas production in the area totaled 126,400 barrels of oil equivalent, or BOE, per day. By the end of 2009, that figure had risen to 144,800 barrels. The company's' reserves at the Cerro Dragon area now total around 979 million BOE, compared with 898 million BOE in 2006. Between 2001 and 2009, Pan American invested around $5.9 billion in its exploration and production activities. -By Taos Turner, Dow Jones Newswires; 5411-4103-6728; [email protected]. (END) Dow Jones Newswires June 25, 2010 12:43 ET (16:43 GMT)