BP awarded 10% stake in Abu Dhabi’s ADCO onshore fields

British oil giant BP has signed an agreement with the Supreme Petroleum Council of the Emirate of Abu Dhabi and the Abu Dhabi National Oil Company (ADNOC) that grants BP a 10-per cent interest in Abu Dhabi's ADCO onshore oil concession, in a deal valued at £1.76 billion to £2.74 billion.

Actual production at the oil concession is 1.66 MBOPD with a life of the deposit of 40 years. The deal covers 15 principal onshore oil fields of Abu Dhabi.

In addition to the interest in the ADCO concession, BP becomes a 10-per cent shareholder in ADCO, the Abu Dhabi Company for Onshore Petroleum Operations Limited, which operates the concession. The agreement includes BP becoming asset leader for the Bab asset group within the concession.

In connection with the transaction, BP plc has agreed to issue new ordinary shares representing approximately 2 per cent of BP's issued share capital (excluding treasury shares), to be held on behalf of the Abu Dhabi government.

In a separate announcement, BP said as consideration for the transaction, the company will issue 392,920,353 new ordinary shares of par value $0.25 each aggregating to $98.23 million, to be held on behalf of the government of Abu Dhabi.

As at 16 December 2016, the issued share capital of BP plc comprised 19,078,998,760 ordinary shares (excluding treasury shares) par value US$0.25 per share, each with one vote and 12,706,252 preference shares par value £1 per share with two votes for every £5 in nominal capital held.

Treasury shares are not taken into consideration in relation to voting at shareholder meetings.

The issued share capital of BP plc will post-issue comprise 19,471,919,113 ordinary shares (excluding treasury shares) par value $0.25 per share, each with one vote and 12,706,252 preference shares par value £1 per share with two votes for every £5 in nominal capital held and the total number of voting rights in BP plc will be 19,477,001,613, BP said.

BP is now the second oil major to acquire a 10-per cent stake after TOTAL last year

The issuance of the new ordinary shares is subject to certain listing requirements and is expected to be completed shortly, BP stated in a release.

BP Group chief executive Bob Dudley and ADNOC Group chief executive officer and member of the Supreme Petroleum Council of the Emirate of Abu Dhabi, Sultan Ahmed Al Jaber signed the agreement in Abu Dhabi on Saturday.

Bob Dudley said, ''Today's agreement marks a new phase in BP's long relationship with Abu Dhabi and, in particular, ADNOC. BP will work closely with ADNOC to realise the full potential of these world-class resources and I welcome Abu Dhabi as an important investor in BP.

''This agreement will provide BP with long-term access to significant and competitive resources that we already understand very well. We will bring our people, cutting-edge technology and experience of managing mature giant fields around the world to help maximise recovery from these assets.''

BP becomes a 10-per cent shareholder of ADCO and the concession alongside Total of France, INPEX Corporation of Japan, and GS Energy of South Korea hold interests of 10 per  cent, 5 per cent and 3 per cent respectively in ADNOC, which is looking for buyers for the remaining 12 per cent of the 40 per cent stake earmarked for foreign partners.

Al Jaber said, ''BP has long been a strategic partner to Abu Dhabi and ADNOC. Alongside our other partners, BP has played an important role in the development of our oil and gas assets. This agreement marks a milestone in our efforts to forge new partnership models that bring technology, expertise and financing aimed at maximizing the value of our resources and supporting the transfer of knowledge.

''We look forward to working with value-add partners that share a mutual interest in advancing the industry and applying innovative technology that improves operational efficiency and recovery.''

The ADCO concession, including the Bab, Bu Hasa, Shah and Asab fields, has total resources of between 20-30 billion barrels of oil equivalent over the term of the concession. The overall production in 2016 is expected to average around 1.66 million barrels of oil per day (bpd). The concession, put in place in January 2015, is valid until the end of 2054.

Brian Gilvary, BP chief financial officer, further commented, ''We have worked closely with ADNOC to structure an agreement that is attractive and strategic for both parties. It is consistent with our aim of delivering competitive returns from a portfolio with a balance of resource types, geographies and resilient pricing models. The lower cost characteristics of this already-producing conventional onshore oil development will be accretive to earnings and cash flow, while providing BP with another building block of long-term growth.''

In support of its interest in the ADCO concession and asset leadership of the Bab assets, BP expects to second up to 50 technical staff to ADCO, bringing technology, expertise and experience to support the ongoing efficient operation and development of the assets.

BP has been present in Abu Dhabi since 1939. Since the 1970s, BP held a 9.5 per cent interest in the ADCO onshore concession that expired in late 2014.

It also holds a 14.67 per cent interest in the offshore concession and ADMA-OPCO which operates this concession, and 10 per cent interests in both the Abu Dhabi Gas Liquefaction Company (ADGAS) and the National Gas Shipping Company (NGSCO).

BP's net share of oil and gas production from Abu Dhabi is currently around 95,000 barrels of oil a day and is expected now to grow to approximately 260,000 barrels of oil a day in 2017.