The BP logo in London, the UK. Picture: REUTERS/Luke MacGregor
The BP logo in London, the UK. Picture: REUTERS/Luke MacGregor

New York — BP was in the lead to acquire the US onshore shale oil and gas assets of BHP Billiton after submitting an offer worth well in excess of $10bn, people familiar with the matter said on Friday.

The move represents a big bet by BP on US oil and gas production at a time when energy prices are rebounding.

It would allow the oil major to significantly rebalance its business with oil production, after focusing largely on natural gas assets.

BP was the frontrunner in the auction for the assets run by BHP and could reach a deal in coming weeks, the sources said, cautioning that an agreement was not certain and it was possible that negotiations could end unsuccessfully.

The exact terms and composition of BP’s offer could not be confirmed. The sources asked not to be identified as the matter was confidential. BP and BHP did not respond to requests for comment.

Onshore shale assets

BHP said in August it aimed to sell onshore shale assets in the Eagle Ford, Permian, Haynesville and Fayetteville basins, which it acquired at the height of the oil boom.

It had come under pressure from activist hedge fund Elliott Management to do so.

The acreage for sale includes holdings BHP acquired in its $12bn takeover of Petrohawk Energy in 2011 that have fallen rapidly in value as the price of natural gas has declined from $4.50 at the time of the deal to a low of $1.60 in 2017.

In 2015, BP began operating its onshore US business as a separate entity to make it more competitive. Since then, BP has expanded the business to include acreage in the Haynesville and Bossier shale plays near the border between Texas and Louisiana.

However, BP’s expansion in US shale fell behind many of its peers. When others were building out their presence onshore, BP’s focus was on the aftermath of the Deepwater Horizon oil-spill disaster in the Gulf of Mexico, which has forced it to pay tens of billions of dollars in damages and restitution since 2010.

If completed, the acquisition of BHP’s acreage would be transformational for BP’s unit, adding oil-rich wells in the Permian and Eagle Ford basins of Texas.

Other major oil companies that participated in the auction for the assets included Royal Dutch Shell and Chevron, sources have said.