The BHP Group Ltd (ASX: BHP) share price is trading lower on Tuesday after announcing a sizeable oil investment.
At the time of writing, the mining giant’s shares are down 0.25% to $36.05.
What did BHP announce?
This morning the mining giant announced that it has signed a membership interest purchase and sale agreement with Hess Corporation to acquire an additional 28% working interest in Shenzi.
Shenzi a six-lease development in the deepwater Gulf of Mexico.
Prior to the agreement, the development was structured as a joint ownership, with BHP owning a 44% interest, Hess holding a 28% interest, and Repsol SA owning the remaining 28% interest.
Should the agreement complete successfully, BHP’s working interest would increase to 72% and immediately add approximately 11,000 barrels of oil equivalent per day of production.
What is BHP paying?
According to the release, BHP and Hess have agreed a purchase price of US$505 million. This remains subject to customary pre and post-closing adjustments.
Management notes that the transaction is consistent with its strategy of targeting counter-cyclical acquisitions in high-quality producing or near producing assets.
And while the company acknowledges that oil prices are at low levels at present because of the pandemic, it continues to believe the fundamentals for oil and advantaged gas will be attractive for the next decade and beyond.
BHP’s President of Petroleum Operations, Geraldine Slattery, commented: “This transaction aligns with our plans to enhance our petroleum portfolio by targeted acquisitions in high quality producing deepwater assets and the continued de-risking of our growth options.”
“We are purchasing the stake in Shenzi at an attractive price, it’s a tier one asset with optionality, and key to BHP’s Gulf of Mexico heartland. As the operator, we have more opportunity to grow Shenzi high-margin barrels and value with an increased working interest,” she added.
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