Plains Exploration & Production (NYSE:PXP) announced on Monday that it will acquire certain deepwater oil production assets in the Gulf of Mexico from BP (NYSE:BP) for $5.55 billion.
The purchase will boost PXP’s daily oil output threefold and increase its crude oil capabilities, company officials said. PXP will finance the deal with new debt, putting its total debt burden to $7 billion, that’s $2 billion above its current market capitalization, Reuters noted.
Investors were not happy with the deal. PXP shares tumbled more than 8% in Monday morning trading. BP shares, by contrast, rose fractionally. The U.K. energy firm has been steadily selling off assets to fund its legal and cleanup costs stemming from the Deepwater Horizon catastrophe in 2010.
Analysts said the assets involved in the deal had previously been valued at $2.2 billion, half of what PXP is paying for them.
With the new deepwater wells, most of PXP’s operations will now be based in the Gulf of Mexico.
The sale of its Gulf assets puts BP closer to raising the $38 billion needed to settle all damages arising from the 2010 explosion and oil spill at the Deepwater Horizon drilling platform.