BP Clears Hurdle to Acquire Brazil Blocks from Devon

BP Clears Hurdle to Acquire Brazil Blocks from Devon

Wednesday, May 11, 2011
BP plc

BP on Tuesday announced it has received final approval to complete the purchase of ten exploration and production blocks in Brazil from Devon Energy.

The regulatory approvals from the Brazilian National Petroleum, Natural Gas and Biofuels Agency (ANP) were the last required to conclude the agreement announced in March last year. It is expected formal completion of the acquisition will take place shortly.

The blocks acquired will give BP a diverse and broad deepwater exploration acreage position offshore Brazil with interests in eight license blocks in the Campos and Camamu-Almada basins in water depths ranging from 330 to 9,100 feet (100-2,780 meters), as well as two onshore licenses in the Parnaiba basin. The Campos basin blocks include four discoveries — Xerelete, pre-salt Wahoo, Itaipu and Fragata — and the Polvo field, which is currently producing around 25,000 barrels of oil per day.

"We are pleased to receive the approvals. The completion of this acquisition delivers a material position in some of Brazil's most important hydrocarbon basins and reinforces the group's strategy of securing strong exploration positions in such basins and working with strong national champions," said BP group chief executive Bob Dudley. "We believe these blocks add distinctive value to our asset base, and offer significant long-term growth potential."

"It is exciting to participate in the development of the oil industry in such an important country as Brazil and the Devon acquisition provides us with an excellent growth platform," said Guillermo Quintero, BP Brazil Regional President.

Last month BP completed the acquisition of the majority control of Brazilian producer of ethanol and sugar Companhia Nacional de Acucar e Alcool (CNAA). BP paid approximately $ 680 million to acquire 83% of the shares and refinance 100% of the company's long-term debt. BP will now be responsible for operating two ethanol plants located in Ituiutaba (Minas Gerais) and Itumbiara (Goias), with current capacity of processing 5 million tons of sugar cane per year.

The blocks are part of the transaction between BP and Devon Energy announced in March 2010. Most of Devon's employees in Brazil are expected to join BP. The transaction is a corporate share sale whereby BP will obtain ownership of Devon Energy do Brasil Ltda., the Devon entity that owns interests in the blocks.

The acquisition gives BP interests in one currently producing field (Polvo) and 4 existing discoveries (Xerelete, Itaipu, Wahoo and Fragata). BP becomes operator of the Polvo field, and of blocks BM-C-32 (containing the Itaipu discovery) and BM-C-34 (consisting of C-M-471 and C-M-473, and containing the Fragata discovery) in the Campos Basin; Block BM-CAL-13 in the Camamu-Almada Basin; and onshore Block BT-PN-2 in the Parnaiba Basin.

BP also gains non-operating interests in blocks BM-C-30 (containing the Wahoo discovery), BM-C-35 and the Xerelete discovery (formerly the BC-2 block), all in the Campos Basin; as well as onshore Block BT-PN-3 in Parnaiba Basin.

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