As part of the company’s plan to divest up to $30 billion of assets over the next 18 months, BP (NYSE: BP) has agreed to sell its oil and gas exploration, production, and transportation business in Colombia to a consortium of Ecopetrol, Colombia's national oil company (51%), and Canada’s Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) (49%).
The two companies will pay BP a total of $1.9 billion in cash, subject to customary post-completion price adjustments, for 100% of the shares in BP Exploration Co. (Colombia) Ltd. (BPXC).
Just weeks earlier, BP agreed to sell assets in the USA, Canada, and Egypt to US-based Apache Corp. (NYSE, Nasdaq: APA) for $7 billion. Up for sale next are BP’s upstream interests in Pakistan and Vietnam.
Under the terms of the agreement, Ecopetrol and Talisman are due to pay BP a cash deposit of $1.25 billion with the balance of payment due on completion of the sale, which is expected to occur by year-end. Barclays Capital acted as sole advisor to BP on this transaction.
Upstream, BPXC has interests in, and operates, the Tauramena (BP interest 31%), Rio Chitamena (31%), Recetor (50%) and Piedemonte (50%) association contracts, which are due to expire between 2016 and 2020. Producing fields on the licences include the Cusiana oil and gas field, and the Pauto and Florena fields. BPXC also has a 40.56% interest and operatorship of the RC4 and RC5 exploration blocks offshore Cartagena, awarded in 2007.
BP Exploration Colombia’s 2P (proven and probable) reserves are estimated at 94 million barrels and its current production is approximately 24,000 equivalent barrels a day in Colombia.
In the midstream, BPXC has interests in the Cusiana gas processing facility and interests in four pipelines totaling some 1,600 kilometres of crude and 400 kilometres of gas pipelines, including a 24.8 per cent interest in the OCENSA crude oil pipeline.
A majority if the 470 BPXC employees will transfer to the new company owners.
This agreement does not affect BP's Castrol lubricants business and other downstream oil activities in Colombia.
Ecopetrol
Ecopetrol CEO, Javier Gutiérrez noted the deal fits into the company’s strategic plan to shore up new reserves, production, and potential areas for its exploratory portfolio. The deal “also strengthens our transportation and natural gas business and increases our share in a group of fields in which we have experience and knowledge,” he continued.
Recently, Ecopetrol, Columbia’s largest integrated oil company, reported financial results for the second quarter and first half of 2010. Net income for the second quarter of 2010 was COL$1.8 trillion with a 136.8% increase over the second quarter of 2009.
This quarter, the company worked to extend the commercial surface of Rubiales field, located 470 kilometers from Bogotá. The company reported record production in the field, up 107% from 2Q09 to 68 Mboe/d.
Besides Colombia, where it accounts for 60% of total production, the Company is involved in exploration and production activities in Brazil, Peru and the United States (Gulf of Mexico).
Talisman
Talisman is a Canadian company that has been present in Colombia for over a decade. It participates in 14 exploration and production blocks in the country, among which are two in association with Ecopetrol and three with Hocol, a member of the Ecopetrol Business Group. One of these latter blocks is Niscota, where a discovery was recently announced in the Huron well. Ecopetrol and Talisman are also partners in two blocks in Peru (101 and 134).
In Colombia, Talisman has an active exploration program in the Llanos region, one of Colombia’s proven hydrocarbon basins. In 2009, Talisman made a gas condensate discovery in the Niscota Block in the Andes Foothills. Talisman is currently drilling a well in the Foreland with another well planned for later in the year. The company plans to commence the appraisal program to the 2009 Huron discovery in the Niscota Block and also complete a number of seismic acquisitions over blocks awarded in recent bid rounds.
Talisman expects that exploration spending in 2010 in Colombia will be approximately $80 million.
In the company’s 2Q10 operating and financial results statement, John A. Manzoni, president and CEO of Talisman pointed to the additional Columbian acreage acquired by the company, as well as the drilling of the first of six planned stratigraphic wells in Block CPE-6.