BP Sells Gas Assets To Tullow Oil

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31 July 2000
BP announced today that it has agreed to sell some UK Southern North Sea gas assets to Tullow Oil for £201 million ($305 million) in a cash-only transaction. The sale has an effective date of 1 January 2000 and is subject to the approvals of the UK Government, the European Commission, licence partners and Tullow shareholders.

The sale is of Atlantic Richfield's (ARCO) share in several gas pipelines, processing facilities and associated fields and is designed to meet the undertaking given by BP to secure approval by the European Commission for BP's takeover of ARCO. Details of the transaction are listed below.

Steve Marshall, BP's Regional President in charge of its UK upstream (exploration and production) assets said: "We are pleased to have reached this agreement with Tullow. It will mark the completion of the required North Sea assets sale. The deal gives Tullow entry to UK offshore waters where they will bring a new perspective, as other new entrants have done successfully before them. This can only benefit the North Sea as it matures further. We have a transition plan in place and will provide all necessary assistance to Tullow and the co-venturers to ensure a safe and smooth handover."

Aidan Heavey, Managing Director of Tullow, said: "We are delighted with this acquisition which in a single transaction, meets all the targets identified in our recent major strategic review. It will transform Tullow, provide sufficient production revenue to fund all our foreseeable international exploration projects and unlock significant upside potential offshore UK. We believe the asset packages to be acquired will not only provide Tullow with cashflow to advance activities in an optimal manner but also provide the platform for significant economic upside in existing producing fields in the near term, and good longer term appraisal and exploration potential."

The sale is made up of two packages and includes ARCO's equity in three pipelines and associated gas fields, as well as in an associated onshore processing terminal.

ARCO's equity in the Murdoch and Boulton gas fields and the Caister-Murdoch System pipeline and;

ARCO's equity in the Thames gas field with surrounding satellites, the Hewett gas field, and the associated pipeline and terminal interests.

ARCO's equity in the following gas fields will transfer to Tullow Oil: Thames, Wensum, Yare, Bure, Bure West, Deben, Welland, Orwell, Gawain, Hewett and its associated fields, Murdoch and Boulton, as well as undeveloped satellite fields and some exploration acreage. Also included in the sale is the interest in the Thames field pipeline, the Hewett field pipeline and the Caister-Murdoch System pipeline, as well as the interest in the Phillips-operated gas processing terminal at Bacton.

Tullow has also indicated a wish to take over from ARCO the operatorship of the Thames field and its associated satellites, subject to the agreement of Government and licence partners. The Thames area assets operated by ARCO currently employ 22 staff based in Great Yarmouth and offshore, with a further 65 contractors' employees. It will take some months to obtain all of the necessary approvals for the changes in ownership and operatorship. No job losses are anticipated as a result of the sale. It is expected that ARCO staff transferred to the new operator will do so under the terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981, which means that they will be employed on the same terms and conditions as they currently enjoy. Existing contracts supporting the operation are not expected to be affected by the sale.

The sale was handled on behalf of ARCO and BP by Schroders Salomon Smith Barney of London.

Net ARCO production from the producing fields in the sale to Tullow amounts to a current average of almost 150 million cubic feet of gas a day with net remaining proved developed reserves at the end of 1999 of 228 billion cubic feet. BP produces about 1.6 billion cubic feet a day of gas (cfdg) in the UK and more than 8 billion cfdg worldwide. BP's UK gas reserves are about 5.5 trillion cubic feet (tcf) and worldwide around 43 tcf.

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