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DEALTALK-BP sales may be rapid, but values

should be fullWed, Jun 16 2010

(For more Reuters DEALTALKS, click [DEALTALK/])

* BP plans $10 bln of asset sales

* BP confident about values, fire sale unlikely - analyst

* Assets seen fetching full value despite BP's problems

* Planned sales less than 4 pct of BP's oil and gas base

By Michael Erman

NEW YORK, June 16 (Reuters) - BP Plc (BP.L: Quote, Profile, Research, Stock Buzz) may be accelerating its asset sales as itworks to fill a $20 billion fund to pay for its Gulf of Mexico oil spill, but don't expect fire sale prices.

The British oil company announced a $10 billion asset sales program on Wednesday as part of a broader set of moves designed toease pressure from the U.S. government. Those moves also included the suspension of BP's dividend for three quarters and a 10percent cut in capital spending in 2010. [ID:nN15112656]

Investment bankers and analysts in the oil and gas industry said that BP's asset base is broad enough that it should be able to pickout assets that will have quite a bit of interest from competitors.

BP said the bulk of the sales would be non-core oil or gas producing assets. Bankers said it was too early to know which assets thecompany will put on the block, but many felt divestments would come mostly from outside the United States.

"They are going to be very mindful of asset selection," said one investment banker, who spoke on the condition of anonymity. "Theyare only going to sell assets where there is enough competitive intensity that people will end up bidding a full price."

Oppenheimer & Co analyst Fadel Gheit said BP told him that it was confident about the values it would receive for the sales.

The company's assets are worth more than $250 billion, Gheit said, which means the sales would account for less than 4 percent ofits oil and gas base.

The sales will also take place in a red-hot oil and gas mergers and acquisitions market and follow divestment programs of a similarsize by smaller companies in the sector -- Devon Energy (DVN.N: Quote, Profile, Research, Stock Buzz) and ConocoPhillips(COP.N: Quote, Profile, Research, Stock Buzz).

Oil and gas deal activity is at a record high this year, with more than $128.5 billion of transactions worldwide through June 4.

"It is definitely a seller's market right now" in the oil and gas industry, Gheit said. "We've seen recently what people are paying forassets in the Marcellus shale and elsewhere -- it's been outrageous numbers."

ASSETS: U.S. vs ELSEWHERE

The U.S. government might prefer that BP hold on to its assets in the country as collateral in case costs from the spill overrun the$20 billion fund, an investment banker said.

Another suggested that BP did not want to be viewed as retreating from what has long been considered one of its primary growthareas.

Still, the company does have interest in several joint ventures in North American shale plays, underground rock formations that holdnatural gas and other fuels.

These shale formations have been among the most sought after energy assets in recent years, as the technology to drill for naturalgas there has improved.

"Right now, they are wondering, 'What is the stuff that we won't have to discount that we can sell as quickly as possible?'" said IanFay, founding partner of Odin Advisors, an energy-focused M&A advisory boutique.

"Maybe it'll be some of the shale acreage they've got in the U.S. That's a hot area right now and there's a lot of money chasing theshale," he said.

NO CASH CRISIS

BP has lost more than 40 percent of its market value since the April 20 explosion of the Deepwater Horizon rig that led to the worstU.S. oil spill ever.

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billion from operations this year. It also has massive credit lines.

That should also give the company the support it needs to hold out for a good price for its assets despite the pressure to sell them.(For more M&A news and our DealZone blog, go to www.reuters.com/deals) (Additional reporting by Ernest Scheyder; Editing byRichard Chang)

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