Shares of beleaguered BP jumped 8% Monday on hopes for the latest attempt to stop the gulf oil leak and reports that BP may be turning to Apache Corp., a Houston-based exploration and production company, for a $10-billion asset sale.
BP's U.S.-traded shares closed at $36.76, up 36% since the company hit a 14-month low in June but down 39% from the stock's value on April 20, when the Deepwater Horizon drilling rig exploded and sank, leaving a well gushing oil into the Gulf of Mexico.
The company was preparing to perform a pressure test to determine whether its latest attempt to cap the crippled well had succeeded, which boosted investor confidence. In addition, Wall Street was responding to media reports that BP was negotiating asset sales with Apache and other companies, as well as to speculation that BP might become a takeover target because of its depressed stock price.
BP spokesman Mark Salt in Houston said the company intended to sell about $10 billion in "noncore, upstream assets" in the next 12 months.
Apache spokesman Bob Mintz declined to comment. Apache fell $2.81, or 3%, to $85.07.
Some analysts dismissed speculation that BP might be an attractive acquisition for one of the major integrated oil companies, such as Exxon Mobil Corp. or Chevron Corp. They said that BP's total liability from the spill hadn't been determined and that an asset sale to Apache would make better sense.
"Neither Exxon nor another major should be willing to take on that kind of unknown liability risk," said Phil Weiss, a senior energy analyst for Argus Research. "Apache is one of the better-managed exploration and production companies."
But analysts wondered whether the boost in BP shares would have legs. One reason is that Apache, though it has a good track record of acquiring and managing working oil assets, might be stretched a little thin right now. And $10 billion would be a huge leap for the company even without other new commitments.
On April 12, Apache said it would acquire Devon Energy Corp.'s oil and natural gas assets on the Gulf of Mexico shelf for $1.05 billion. Just three days later it announced plans to buy Mariner Energy, which has oil assets in the Gulf of Mexico, for $2.7 billion in cash and stock.
In the hierarchy of the oil industry, Apache is in the same category as Westwood-based Occidental Petroleum Corp. Apache owns no refineries or gasoline stations. Like Occidental, it has established a reputation for taking over old oilfields and getting more-than-expected production out of them. But Apache is only about half the size of Occidental.
Apache earned $713 million, or $2.10 a share, in the first quarter. That fell 14 cents below analysts' average prediction, but the number still represented a 224% increase over the same quarter a year earlier. "This would be the biggest acquisition in Apache's history," said Fadel Gheit, senior energy analyst for Oppenheimer & Co. Apache wouldn't move forward unless the deal made sense, he said. "It's very well run, but they are not going to start something that they cannot finish."
If BP manages to unload the $10 billion in assets, some experts say it would probably will be the first of many sales.
"The leak is still ongoing and the extent of the environmental damage is unknown," said Joe Hahn, a professor at Pepperdine University's Graziadio School of Business. "When they get to the phase of the multiple penalties they might be found at fault for, they are going to have to fund that somehow. BP still has a long way to go on this."