BP, Stricken by Low Oil Prices and High Debt, to Sell London Headquarters
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
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
Write to Sarah McFarlane at firstname.lastname@example.org
(END) Dow Jones Newswires
November 04, 2020 12:06 ET (17:06 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.