BP (BP), which needs to raise funds to help clean up the worst oil spill in U.S. history, said Tuesday it will sell its operations in Colombia for $1.9 billion to Ecopetrol (EC) and the Canadian company Talisman (TLM). Ecopetrol is the largest oil company in Colombia.
Under terms of the deal for BP Exploration Company Colombia, Ecopetrol will receive a 51% interest in the business, with 49% going to Talisman. Ecopetrol and Talisman will pay BP a cash deposit of $1.25 billion with the balance of payment due on completion of the sale.
The transaction includes gas and oil exploration and production assets as well as oil transportation and gas marketing. BP Exploration Colombia's proven and probable reserves are estimated at 94 million barrels and its current production is approximately 24,000 equivalent barrels a day in Colombia. BP Exploration Colombia currently employs about 470 workers, most of whom will keep their jobs within the new operating company.
The deal is hardly a surprise. BP said last month that it would sell assets to help fund the clean-up efforts in the Gulf of Mexico over the next 18 months. Last week, it posted a loss of $17.5 billion. Embattled CEO Tony Hayward will be replaced in October by Bob Dudley, an American who is the first non-Brit to run the company. BP has already agreed to sell assets assets in North America and Egypt to Apache Corp. (APA) in a $7 billion deal. Among the other assets rumored to be on the auction block are BP's interests in Alaska.
"BP has been involved in Colombia for more than 20 years and played a major role in finding and developing the country's major oilfields," Hayward says in a press release. "These have contributed significantly to BP's global production over the years. But it now makes sense for the assets to go to owners more willing than BP to invest in their future development."
Under pressure from the Obama administration, the UK-based company agreed to fund a $20 billion escrow fund to compensate victims. Some environmentalists are demanding that BP make a separate $5 billion "down payment" to repair the damage to the Gulf of Mexico, which has been hit with 20 times the amount of oil that was spilled in the Exxon Valdez disaster.
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