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British Petroleum (NYSE:BP) has agreed to sell five Gulf of Mexico oil fields to Plains Exploration & Production (NYSE:PXP) for $5.5 billion. This price far exceeds the $2.2 billion valuation that Royal Bank of Canada analyst Peter Hutton, who sees this as “positive progress for BP,” put on the assets. “The implied price of the deal is significantly higher than we expected,” he added. Tudor Pickering analysts say BP got about $700 million more than they projected.
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Bob Dudley, BP’s group chief executive, said in a statement, “While these assets no longer fit our business strategy, the Gulf of Mexico remains a key part of BP’s global exploration and production portfolio and we intend to continue investing at least $4 billion there annually over the next decade.”
PXP shares are down 9 percent right now, as the company took on $7 billion in debt to fund the deal. To compensate, it plans to sell $2 billion in natural gas assets and hedge 90 percent of its oil production to 2015 in order to lock in cash flows.
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