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BP Plans New Unit for US Lower 48 Biz

Zacks Equity Research

Oil giant BP plc (BP) has proposed to form a separate business to manage its offshore oil and gas assets, including its shale operations in the U.S. Lower 48.

Currently, BP manages the region through its North America Gas group based in Houston. The new business will also be managed from a new location in Houston and not the existing Westlake campus. The unit will also have a separate management team and different governance, processes and systems suited to deal with the unique competitive and operating environment onshore U.S. Lower 48.

Recently, BP completed reforming its North American gas portfolio by divesting noncore assets and focusing development in unconventional plays, such as the Eagle Ford Shale. Now it wants to reshape the way its Lower 48 business is run.

The move is expected to enhance competitiveness as well as assist U.S. Lower 48 onshore business to lead in innovation and development of technologies for unconventional resources. The decision is also likely to assist in unlocking the significant value related to BP’s extensive resource position onshore U.S. Lower 48. The company’s recent proposal is in sync with its strategy of delivering value over volume.

Lately, BP’s request to a federal judge to delay oil spill compensation payments to seafood workers was denied. BP estimates the total payment under the spill compensation to exceed $7.8 billion.

BP, which is still facing challenges from the Deepwater Horizon spill in the Gulf of Mexico, intends to report separate financial results for the new business from 2015. The results will not include offshore operations.

BP currently holds a Zacks Rank #3 (Hold). Other stocks in the oil and gas sector such as Helmerich & Payne, Inc. (HP), Matrix Service Co. (MTRX) and Patterson-UTI Energy Inc. (PTEN) with a Zacks Rank #1 (Strong Buy) are expected to outperform.

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