Chevron takes control of BP deepwater Gulf of Mexico discoveries

1/28/2015

JOE CARROLL

HOUSTON (Bloomberg) -- Chevron Corp. is expanding its deepwater oil portfolio by assuming control of multibillion dollar projects from rival BP Plc as the U.K. company freezes wages and cuts spending in response to collapsing crude prices.

BP surrendered leadership of its Gila and Tiber oil discoveries and the Gibson exploration prospect in the U.S. Gulf of Mexico to Chevron under an agreement that also gives the U.S. company partial ownership of those assets, the companies said in separate statements.

The deal underscores how stronger operators can benefit from new opportunities in the oil market downturn as rivals sell assets to raise cash and reduce costs.

BP, the second-largest oil producer in the U.S. part of the Gulf, is retrenching worldwide after crude lost more than half its value in a seven-month rout. The drop in prices has eroded cash flow the company relies on to finance the highest dividend yield among the world’s largest energy explorers.

BP said this month that employees won’t receive pay raises this year and has been selling assets and cutting jobs from the Caribbean to Central Asia. Europe’s third-largest oil producer by market value has been auctioning off tens of billions of dollars in assets since the 2010 Macondo blowout in the Gulf of Mexico that killed 11 rig workers and spewed millions of barrels of crude into the sea.

Chevron, in contrast, is increasing investment in the deepest, most-challenging areas of the Gulf despite the collapse in global crude markets. The San Ramon, California-based company began pumping oil last month from the $7.5 billion Jack/St. Malo complex that holds half-a-billion barrels of crude south of Louisiana.

For projects that endure 30 or 40 years, a temporary drop in prices isn’t going to make the companies put off development, Jackson Sandeen, a Gulf of Mexico senior analyst at Wood Mackenzie Ltd., said in a telephone interview.

Half-a-Billion Barrels

Chevron’s success bringing Jack/St. Malo into production is part of BP’s reason for offering operatorship to the company, BP said in a statement today.

In Gila and Gibson, Chevron will own 36%, BP will retain 34% and ConocoPhillips holds 30%.

BP and Chevron will each own 31% of the Tiber field. Petrobras and ConocoPhillips will hold 20% and 18%, respectively.

BP discovered Tiber in 2009 and Gila in 2013. The U.K. company was a partner in Chevron’s discovery of the nearby Guadalupe discovery last year.

Tiber, Gila and Guadalupe may all be hooked up to a single floating platform when it’s time to begin pumping oil and gas from the fields, Chevron said.

Royal Dutch Shell Plc was the largest oil producer in the Gulf last year, according to the U.S. Bureau of Ocean Energy Management.

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