BP pulls off biggest deal in two decades with £8bn US coup

BP splashed out $10.5 billion (£8 billion) on its biggest deal for nearly two decades on Friday as the oil major embarked on a vast expansion of its US business.

The dramatic move for Australian miner BHP Billiton’s onshore oil and gas shale operations marks a major turning point eight years on from the Deepwater Horizon rig disaster in the Gulf of Mexico.

The oil spill has cost BP around $66 billion in clean-up costs and fines.

BP is adding 190,000 barrels of day and 4.6 billion barrels in reserves with the move for BHP’s Petrohawk Energy, which has fields in Texas, including the huge Permian Basin.

It beat off rivals including Royal Dutch Shell and Chevron for the assets, which will take its total US production to 885,000 barrels a day. After billions in sell-offs since Deepwater it is BP’s biggest swoop since it spent $26.8 billion on Arco in 1999.

Chief executive Bob Dudley called the deal “transformational”, increasing its exposure to shale oil and enabling over $350 million in annual savings through the combination with its existing US business.

BP also cheered investors with a first increase in the dividend since the oil price slumped in 2014.

UBS analyst Jon Rigby said: “For BP it signals the company finally moving on from Deepwater Horizon, freely managing its portfolio.”

For BHP the sale ends a disastrous seven-year foray into shale on which it effectively blew $19 billion of shareholders’ funds.

Investors led by activist Elliott Management have been pressing it to sell onshore assets for the past 18 months and BHP put the business up for sale last August.

BHP will book a $2.8 billion loss on the sale, but shares in the company rose by 61p, or 4%, to 1733p as analysts said the sale price was higher than expected.