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BP to Divest Stake in Oman Gas Project for Over $1 Billion
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BP plc (BP - Free Report) is in early talks to divest around 10% interest in Oman's Khazzan natural gas field for more than $1 billion, per Bloomberg. This divestment will likely help the company to reduce its debt load.
Asset Details
BP currently holds a 60% operating stake in the field while Oman Oil Company Exploration & Production and a subsidiary of Malaysian state-run company Petronas own the rest. By divesting 10% in the field, BP can bring in another energy company. This will enable the British energy giant to share its cost for project development.
In September 2017, the company brought the phase one online in the Khazzan natural gas field, where production is expected to reach 1 billion cubic feet of natural gas per day (Bcf/d). The company is currently developing the second phase at the site that is likely to commence production next year. The addition of the second phase will boost total production to 1.5 Bcf/d. Notably, the Khazzan natural gas field is one of the very few outside the United States that uses hydraulic fracturing technology.
Divestment Rationale
The asset selloff will help the company to achieve its divestment goal. The energy giant has sold $10.1 billion worth of assets since the beginning of 2019, which is part of the company’s broader $15-billion program targeted by mid-2021. The company is also expected to divest its Alaska business to meet the target. The sale program is part of the company’s plan to lower its debt load, which is significantly higher than most of its peers.
Balance Sheet
Debt exposure to the company’s balance sheet increased significantly in the first quarter of 2020. Net debt was recorded at $51,404 million, up 13.1% from $45,442 million in the prior quarter. Importantly, although BP’s cash and cash equivalents of $18,139 million could meet $12,376 million of the current debt, the firm’s ability to repay long-term debt of $56,741 million is questionable given declining times interest earned ratio.
Price Performance
BP’s shares have gained 5.4% from the beginning of the second quarter compared with 15.3% growth of the industry it belongs to.
Chesapeake Energy delivered an average positive earnings surprise of 42.8% in the last four quarters.
CNX Resources beat earnings estimates thrice and met once in the last four quarters, with average positive surprise of 111.5%.
Comstock Resources’ 2020 sales are expected to gain 33.7% year over year.
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BP to Divest Stake in Oman Gas Project for Over $1 Billion
BP plc (BP - Free Report) is in early talks to divest around 10% interest in Oman's Khazzan natural gas field for more than $1 billion, per Bloomberg. This divestment will likely help the company to reduce its debt load.
Asset Details
BP currently holds a 60% operating stake in the field while Oman Oil Company Exploration & Production and a subsidiary of Malaysian state-run company Petronas own the rest. By divesting 10% in the field, BP can bring in another energy company. This will enable the British energy giant to share its cost for project development.
In September 2017, the company brought the phase one online in the Khazzan natural gas field, where production is expected to reach 1 billion cubic feet of natural gas per day (Bcf/d). The company is currently developing the second phase at the site that is likely to commence production next year. The addition of the second phase will boost total production to 1.5 Bcf/d. Notably, the Khazzan natural gas field is one of the very few outside the United States that uses hydraulic fracturing technology.
Divestment Rationale
The asset selloff will help the company to achieve its divestment goal. The energy giant has sold $10.1 billion worth of assets since the beginning of 2019, which is part of the company’s broader $15-billion program targeted by mid-2021. The company is also expected to divest its Alaska business to meet the target. The sale program is part of the company’s plan to lower its debt load, which is significantly higher than most of its peers.
Balance Sheet
Debt exposure to the company’s balance sheet increased significantly in the first quarter of 2020. Net debt was recorded at $51,404 million, up 13.1% from $45,442 million in the prior quarter. Importantly, although BP’s cash and cash equivalents of $18,139 million could meet $12,376 million of the current debt, the firm’s ability to repay long-term debt of $56,741 million is questionable given declining times interest earned ratio.
Price Performance
BP’s shares have gained 5.4% from the beginning of the second quarter compared with 15.3% growth of the industry it belongs to.
Zacks Rank & Stocks to Consider
BP currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Chesapeake Energy Corporation (CHK - Free Report) , CNX Resources Corporation (CNX - Free Report) and Comstock Resources, Inc. (CRK - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chesapeake Energy delivered an average positive earnings surprise of 42.8% in the last four quarters.
CNX Resources beat earnings estimates thrice and met once in the last four quarters, with average positive surprise of 111.5%.
Comstock Resources’ 2020 sales are expected to gain 33.7% year over year.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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