By Sarah McFarlane 

LONDON -- BP PLC is in talks to sell its London headquarters to help cover debt, punctuating the crisis facing the British oil giant and its peers as they navigate a pandemic that has decimated demand for oil.

BP bought the office block in the tony Mayfair section of London almost two decades ago, a time when it and its rivals enjoyed the prospect of growing oil demand and unrivaled stock-market valuations. Then-CEO John Browne had just pulled off the largest oil deal in history at the time, a move that triggered a series of other, big oil deals that created today's handful of supermajors -- giant, integrated oil companies that pumped crude, refined it into gasoline and sold it at filling stations around the world.

Today, the outlook for those companies is dramatically changed. The new coronavirus pandemic has destroyed demand for crude amid economic lockdowns and other restrictions. Forecasters say it may take years to return to pre-Covid oil demand levels, if ever. BP itself, in one long-term oil-market scenario it laid out earlier this year, forecast demand may never again hit 2019 levels.

That has triggered a year of heavy losses among the West's oil giants: Exxon Mobil Corp., Chevron Corp., Royal Dutch Shell PLC, BP and France's Total SE. Shell and BP have cut dividends to preserve cash, while BP said it would seek to sell assets to help pare its especially high debt load.

Shares have fallen sharply, destroying market value. Earlier this year, Exxon, for years America's most valuable company by market capitalization, lost its place in the prestigious Dow Jones Industrial Average blue-chip stock index.

BP bought the office at 1 St. James's Square in 2001 from Swedish telecommunications company Ericsson AB. Lord Browne had just taken advantage of a dip in oil prices to orchestrate the purchase of Amoco. It was the biggest foreign purchase of an American company at the time, spurring further oil-industry consolidation, including Exxon's acquisition of Mobil.

Almost 10 years later, a blowout at a BP offshore platform in the Gulf of Mexico killed 11 workers and led to the world's biggest maritime oil spill. Mired in financial penalties and other liability from the disaster, it shed billions of dollars of assets, greatly reducing its size.

The pandemic has delivered a second shock. BP had already started to pivot to become less dependent on oil, while increasing its investments in low carbon energy such as wind and solar. Investors, though, haven't been convinced. BP shares have fallen by more than half since the start of the year.

The company, with a market capitalization of about $55 billion, had $40.4 billion worth of debt at the end of September. It has said it is targeting reducing that to $35 billion, including through asset sales. Earlier this year, it sold its petrochemical business for $5 billion and a 49% stake in its U.K. retail sites for GBP400 million ($518 million).

A BP spokesman said if a sale of the headquarters is completed, it will lease back the space, where Chief Executive Bernard Looney and the rest of the BP leadership team is based. The office has been mostly empty after BP encouraged staff to work from home amid the pandemic.

People familiar with the matter said BP hopes to raise about GBP250 million ($324 million) through a sale to Hong Kong-based investor Lifestyle International Holdings Ltd. Lifestyle International didn't immediately respond to a request for comment.

Write to Sarah McFarlane at


(END) Dow Jones Newswires

November 04, 2020 12:06 ET (17:06 GMT)

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