BP takes 10% of ADCO concession against $2.2b worth of shares to Abu Dhabi

BP cemented its 77-year relationship with Abu Dhabi by swapping about $2.2 billion of its own shares for a stake in one of the emirate’s largest onshore oil concessions.

The U.K.’s second-biggest oil group will issue new ordinary shares to pay for 10 percent of the Abu Dhabi Company for Onshore Petroleum Operations Ltd., giving the emirate a 2 percent holding in BP, the London-based company said Saturday in a statement. Abu Dhabi investor Mubadala Development Co. is likely to hold the BP shares, two people with knowledge of the matter said, asking not to be named before a formal announcement.

The agreement promises BP additional cash flow and revenue following a downturn that has forced the industry to slash billions of dollars of investments worldwide in the past two years. The payment in shares also helps BP preserve its own cash and maintain a balance sheet that has seen debt and leverage rise during the oil-price collapse.

“The economics are good for us and for our shareholders, and for BP it brings a strategic partner,” Chief Executive Officer Bob Dudley said in an interview in Abu Dhabi. “This agreement will provide BP with long-term access to significant and competitive resources that we already understand very well.”

The deal will provide an output of 160,000 barrels a day, in addition to the 95,000 barrels BP now produces in Abu Dhabi, Dudley said. The 40-year concession includes the Bab, Bu Hasa, Shah and Asab fields with total resources of as much as 30 billion barrels of oil equivalent, BP said.

“What the majors bring is how to deploy technologies and also how to manage and organize large scale projects,” Robin Mills, chief executive officer of Dubai-based oil consultant Qamar Energy, said by phone. “It always made sense that Abu Dhabi will look for another partner” for the Abu Dhabi onshore fields. More major oil companies could come in, he said.

France’s Total SA owns a 10 percent stake in the Abu Dhabi onshore concessions, Japan’s Inpex Corp. has 5 percent and South Korea’s GS Energy 3 percent, BP said. The Abu Dhabi National Oil Company is still looking for partners to take the remaining 12 percent of the 40 percent reserved for overseas oil companies.

Abu Dhabi’s 2 percent stake will make it one of BP’s biggest shareholders. Kuwait, which along with the United Arab Emirates is a member of the Organization of Petroleum Exporting Countries, owns 1.7 percent. The British company said the new shares will be priced at 447 pence a share.

BP has been present in Abu Dhabi since 1939 and held a 9.5 percent stake in the company that operates the onshore fields since the 1970s, according to the statement. The concession expired in 2014 and Abu Dhabi started negotiating partnerships again in the following year. BP also has stakes in offshore fields and a gas liquefaction company.