Oil major BP (NYSE:BP) has sold its stake in gas fields in Wyoming for a total of 1.03 billion to Linn Energy.  The sale marks the latest deal in the company’s ongoing assets sale that aims to generate $38 billion to pay for spill expenses incurred because of the Gulf of Mexico disaster and to fund future expansion plans. BP said that it will look to reinvest the proceeds of this sale into higher growth opportunities in North America and in other locations. CEO Bob Dudley said that the company was still open to investing in the natural gas sector in North America and in liquid rich shales. Low gas prices have forced companies to cut down on gas production in the U.S.
We are revising our $60 price estimate for BP, which is at 55% premium to its current market price.
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The Linn energy deal marks the latest move in BP’s strategy to sell assets to focus on new exploration opportunities that can yield higher rates of return. The company is also exploring opportunities to sell its stake in its Russian subsidiary TNK-BP, which accounts for a significant part of its global production. (See: BP’s Russian Sale May Mark A Strategic Shift)
BP is looking to use the proceeds of these sales to meet expenses related to the 2010 Macondo incident and to fund its exploration plans in the U.S. GoM, the North Sea and offshore Africa. The asset sales are already resulting in declining output levels for the company, but BP is looking to cut down on production related activity and focus on new exploration to maximize shareholder returns.
In the latest deal, BP will sell its working interest in 260 wells in the Jonah and Pinedale fields as well as its operations center in Sublette County.  The sale could hit its natural gas production in the U.S. by about 146 Million cubic feet / day (Mcf/d). The deal comes at a time when gas prices in North America are recovering after touching their lowest levels in over 10 years earlier in April. BP has said that it may consider investing some of the proceeds in shale plays such as the Utica shale, where exploration can yield gas as well as light oil.
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