BP (NYSE:BP) is looking to boost its business in the U.S. with a $10.50 billion acquisition.
The deal will have BP buying 100% share capital of Petrohawk Energy, which is a subsidiary of BHP Billiton (NYSE:BBL). This will grant it access to the company’s oil and gas production and resources. This includes operations in the “Permian and Eagle Ford basins in Texas and in the Haynesville gas basin in Texas and Louisiana.”
BP notes that it will be using cash from existing resources to complete its acquisition of assets. However, it won’t be paying the full $10.50 billion all at once. Instead, the oil company plans to pay an upfront amount of $5.25 billion at the time of the deal. The remaining $5.25 billion will be paid in the form of six installments over the next six months after the deal’s completion.
The company is hoping that this acquisition will be good news for BP stock. It says that it expects it to be accretive to earnings and cash flow per share. The company says that it will also increase its Upstream free cash flow target by $1 billion to between $14 billion and $15 billion in 2021.
The deal is also a boon to holders of BP stock. The company says that strong cash flow increase from the deal is allowing it to increase its dividend for the second quarter of the year. This has it increasing the quarterly dividend to 10.25 cents per share. The dividend will be payable to holders of BP stock on Sept. 21, 2018. These shareholders must be on record as of Aug. 10, 2018 to receive the dividend.
BP stock was up slightly and BBL stock was up 2% as of Friday morning.
As of this writing, William White did not hold a position in any of the aforementioned securities.