Why is BP Selling This North Sea Stake?

British Petroleum’s (NYSE:BP) 2010 Gulf of Mexico oil spill placed a huge strain on the oil producer’s balance sheet, a strain that the company is still feeling today. As Bloomberg reported on Wednesday, BP sold a $1.1 billion stake in its North Sea fields to Abu Dhabi National Energy in order to bring its divestitures closer to the $38 billion target the company set to slim its operations. While BP made settlements with the spill’s victims earlier this year and a $4.5 billion deal with the U.S. government over criminal charges, the company will face civil charges next year.

Here are the Particulars of BP’s Abu Dhabi Deal

Since the spill, BP has been disposing of assets to support its litigation costs and simplify its operations.

Investing Insights: Is Chesapeake Energy a Long-Term Investment?

“This transaction is in line with BP’s strategy to focus on a smaller number of higher-value assets with long-term growth potential,” said Chief Executive Officer Bob Dudley in the statement.

Abu Dhabi National Energy, the state-controlled power and oil company known as Taqa, will gain interests in the Harding, Maclure, and Devenick fields, according to the statement. The deal will add 21,000 barrels of oil a day to the company’s output, a 50 percent increase from its current capacity, and nearly double its existing reserves in the region.

The deal’s $1.1-billion price tag does not include future payments-dependent oil prices and production, which BP expects to amount to $250 million. BP has already received a deposit of $632 million from Taqa, and the deal is expected to close in the second quarter of 2013.

CHEAT SHEET Analysis: Is BP’s Sale a Positive Catalyst for its Stock?

One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. In this case, the immediate effect of the Abu Dhabi deal was slight. However, as BP’s asset disposal is focused on simplifying and strengthening its operations, deals such as this one are likely to have a positive impact on its stock over the long term.

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