Do Conoco’s asset sales offer hope for BP?

July 7, 2010

Deutsche Bank analyst Paul Sankey says the U.S. oil major may overshoot its $10 billion target for asset sale by 50 percent. He reinstated coverage of ConocoPhillips with a “buy” rating, crediting the rising premiums the company has been able to command. So far, Conoco has raised more than $5 billion from the sale of stakes in its Canadian oil sands venture, Syncrude, to China’s Sinopec and the stake in a truck stop joint venture to Pilot Travel Centers.

Sankey expects about $1.5 billion to $2 billion from Conoco’s North American assets, including $1 billion from its 25 percent interest in the Rockies Express pipeline. This would bring the total asset sale proceeds to about $7 billion this year — well ahead of the company’s target of $5 billion, he said.

Conoco has been selling to cut its spiraling debt. That may not be as dramatic an incentive as what is going on in the Gulf, but could mean BP may tap into the same demand for oil and gas assets to pay for its clean-up efforts. If you believe the forward price curve for oil, buying assets now may be the best chance to prepare for the coming price increases.

Certainly the price action is pointing towards increasingly juicy premiums. News today that Total has agreed to buy UTS Energy for $1.42 billion in cash, twice the amount the French oil major offered for the Canadian oil sands developer 18 months ago, should be encouraging for other sellers.

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