What Assets Will BP Sell To Fund The Gulf Disaster Clean-Up?

Wall St. is starting to consider what the Gulf disaster will cost BP plc NYSE: BP) both in legal and liability costs and clean-up expenses. Some scientists believe that the leak cannot be capped and will put more crude into the sea for months.

Research firm Credit Insights projects that BP and Anadarko, a partner in the Deepwater Horizon project, will have to spend $35 billion on the fiasco.

There has been a great deal of speculation about whether BP will be sold because its market cap has fallen so much as its future is in doubt. According to Reuters, “Consensus estimates call for BP to have about $8.4 billion of free cash this year.” That means that BP has nowhere near enough money to cover the Gulf costs even if they were spread over three or four years. Bloomberg speculates that the UK-Based company will start to sell assets. “The 26 percent stake in Prudhoe Bay on Alaska’s North Slope and other BP assets could attract suitors such as China National Petroleum Corp., Occidental Petroleum Corp. and Hess Corp., said Douglas Ober, chief executive officer at Petroleum & Resources Corp. in Baltimore, the oldest U.S. oil fund.”

But, what does BP actually have to sell? Among the assets it may be able to dispose of quickly are its oil sands projects in Canada. Oil sand exploration and production is viewed by many energy experts as a replacement for traditionally produced crude. BP also has large carbon capture facilities in the Middle East and California.

The most ready way for BP to raise money is to sell its refining facilities. These refineries are already built out and fully operational. They would make an attractive asset to another large refiner like Exxon Mobil (NYSE: XOM).

BP also has rights to fields in Angola, Egypt, and Libya. The Libyan operation holds 30,000 square kilometers of land.

BP’s fields may be easier to sell than its piece of joint ventures like Prudhoe. Asset sales are almost certainly coming. The question is how much of BP will be left after the auctions?

Douglas A. McIntyre