BP acquisition signals move to become major U.S. shale producer

By Staff | July 31, 2018

An analysis by Rystad Energy concludes that BP’s $10.5 billion move to acquire most of BHP Billiton shale acreage in North America—announced July 26—signals “a bold return by the UK oil giant to the lower 48 states and gives it a prominent position in the red-hot North American tight oil play.”

According to Rystad Energy’s analysis, BHP Billiton’s shale assets (excluding Fayetteville, which was not included in BP’s acquisition) carry a value of $10.7 billion, assuming a flat Brent oil price of $73 per barrel. The deal, one of the largest acquisitions in BP’s history, gives the company secure access to new projects that can contribute on a large scale to growing its production.

“Although BHP has failed to show outstanding productivity results in the Permian-Delaware basin recently, we have observed further delineation of multiple stacked benches on BHP’s land as well as on some adjacent acreage positions,” said Alisa Lukash, a shale analyst for Rystad Energy. “This resulted in the de-risking of a significant number of additional well locations in Rystad Energy’s bottom-up valuation model.”

By acquiring BHP’s acreage in the Eagle Ford, Permian and Haynesville basins, BP has bolstered its portfolio with prime acreage for tight oil developments. Rystad Energy estimates that these assets hold risked recoverable resources of about 3.6 billion barrels of oil equivalent, with oil representing about 2.0 billion barrels.

“These assets will be vital in relation to BP’s efforts to maintain its overall production levels through 2025,” Lukash said. “In the short term, the new acreage will add around 65,000 bpd to BP’s oil production. The operator is expected to ramp up activity on the properties it has acquired from BHP.”

Rystad Energy expects production to rise rapidly beyond 100,000 bpd, with an expected plateau at around 150,000 bpd. BP’s legacy production is expected to decline in the medium term, further emphasizing the importance of this new acreage to BP’s production profile moving forward.