• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Energy

BP Shale Assets Purchase Will Transform Company

Move to acquire BHP's U.S. onshore assets will sharply increase BP's oil and gas output in the U.S.
By ELIECER PALACIOS
Jul 27, 2018 | 04:47 PM EDT
Stocks quotes in this article: BP, BHP, HES, PXD

We think that BP plc's (BP)  $10.5 billion acquisition of BHP Billiton Ltd. (BHP)  onshore shale assets is transformational for its unconventional business in the U.S. The portfolio includes unconventional assets in the highly-prized Permian-Delaware basin in Texas, premium positions in the Eagle Ford shale, also in Texas, and in the Haynesville shale in Louisiana.

(Unconventional oil and gas are typically produced from sources such as oil shale, oil sands or extra heavy oils.)

This acquisition will significantly increase the liquid hydrocarbon proportion of BP's production and resources in the U.S., to around 27% of production (from 14%) and 29% of resources (from 17%). The assets purchased currently produce around 190,000 barrels of oil equivalent per day, of which 45% are liquid hydrocarbons, a very good balance between crude oil and natural gas.

The major question here is: can BP leverage their scale and competitive advantage in other regions and basins, to make it in the basins that were pioneered by the independents?

We are bullish on BP following this transaction, given that they are one of the few oil majors that has a strong presence in the U.S. unconventional resources space. The area has traditionally the domain of mid-sized private and public independent exploration & production companies. BP had exited the Permian Basin in 2010 in the wake of the Deepwater Horizon oil spill.

This transaction is also a big victory for Paul Singer at Elliot Management who, for months, was calling the Board of Directors, to divest BHP's domestic oil & gas operations to focus on its core metals and mining business. As happened with Singer's prior activist campaign with Hess Corp.  (HES) , his efforts paid out.

We see this sale as positive for BHP and we have a favorable view on the stock as the company moves to reshape its strategy and continue with other non-core divestitures.

The next large unconventional divestiture earmarked for sale to keep an eye on is the Eagle Ford assets operated by Pioneer Natural Resources (PXD) . These assets are being developed in partnership with Reliance Industries of India and Grupo Alfa of Mexico (ALFAA.MX). For a long time, PXD has been considering divesting this asset as it looks to re-allocate capital back into the Permian.

We will recommend taking long positions on PXD ahead of further divestitures that would improve its balance sheet.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Palacios had no positions in any stocks mentioned.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long BP.

TAGS: Investing | U.S. Equity | Energy | Mergers and Acquisitions | Stocks

More from Energy

FuelCell Energy's Charts Tell Us a Bearish Story

Bruce Kamich
Apr 13, 2021 10:16 AM EDT

The speculative runup in FCEL seems to be over. Approach with caution.

These Stocks Are Losing Energy

Ed Ponsi
Apr 13, 2021 8:30 AM EDT

Several signs point to underperformance for energy names in the near term.

Avoid Tanking Up on Schlumberger

Bruce Kamich
Apr 12, 2021 11:48 AM EDT

Instead, the charts advise taking profits. Here's why.

Plug Power Is Still Unplugged

Bruce Kamich
Apr 12, 2021 11:21 AM EDT

The charts of PLUG are bearish and losing power.

Retirees: Get Plugged Into This Dividend Stock

Bob Ciura
Apr 7, 2021 12:27 PM EDT

Evergy is a high yield utility stock offering dependable dividends.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:42 PM EDT PAUL PRICE

    Wednesday on Real Money Pro

    Make this stock a 'part' of your portfolio.
  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • 11:18 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 5 Pillars of Exceptional Trading
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login