BP Plans to Divest Its Pipeline Stake in US Gulf of Mexico
BP Plc BP seeks to divest a 49% stake in its oil and gas pipeline network, located in the U.S. Gulf of Mexico, per a Reuters report.
The company aims to generate up to $1 billion through the potential divestment, which would help address its targets of reducing debt and sustaining its dividend payments.
Despite increasing its shareholder payout by 10% during the second-quarter results, the company had a substantial net debt of $23.7 billion.
BP has established a company to house its interests in the U.S. Gulf of Mexico pipelines, retaining a 51% ownership stake while seeking to sell the remaining interest. The pipeline company generates 12-month earnings before interest, tax, depreciation and amortization of $200 million.
BP is one of the leading oil and natural gas producers in the U.S. Gulf of Mexico. It expects to achieve a production level of 400,000 barrels of oil equivalent per day from this region by the mid-point of the current decade.
The company operates five offshore platforms, with the most recent addition, Argos, commencing its operations in April. BP holds stakes in several pipelines in the U.S. Gulf of Mexico region, including the 161-mile Mars Oil Pipeline, the 89-mile Endymion Oil Pipeline and the 115-mile Cleopatra Gas Pipeline.
This wouldn’t be the first instance of BP divesting stakes in U.S. assets. In 2021, BP established a venture focused on infrastructure for transporting refined products, and investment firm Sixth Street Partners acquired a 49% stake in this venture for $700 million. According to Bloomberg News, Sixth Street made an additional investment of $400 million in this venture last month.
BP seeks to enhance its portfolio and financial position through the stake sale. However, no deal has been officially confirmed or announced regarding the potential divestment of BP’s stake in its U.S. Gulf of Mexico pipelines.
Zacks Rank & Stocks to Consider
BP currently carries a Zack Rank #5 (Strong Sell).
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
APA Corporation APA boasts of a large, geographically diversified reserve base with multi-year trends in reserve replacement.The company is using the excess cash to reward shareholders with dividends and buybacks. APA bought back 1.3 million shares at $33.72 apiece in the second quarter. The company also shelled out $77 million in dividend payments.
APA Corp has witnessed upward earnings estimate revisions for 2023 and 2024 in the past seven days. The consensus estimate for APA’s 2023 and 2024 earnings per share is pegged at $4.57 and $6.17, respectively.
SM Energy Company SM is an independent oil and gas company that explores, exploits, develops, acquires, and produces oil and gas in North America. SM's strong cash generation places it in a better financial position, allowing for investments in dividends, debt reduction and future growth.
SM Energy has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for SM’s 2023 and 2024 earnings per share is pegged at $5.66 and $6.81, respectively.
Matador Resources Company MTDR is among the leading oil and gas explorers in the shale and unconventional resources in the United States. MTDR’s prime priorities include lowering debt, delivering free cashflows and maintaining or increasing dividends.
Matador Resources has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for MTDR’s 2023 and 2024 earnings per share is pegged at $6.36 and $8.56, respectively.
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