BHP has signed a Membership Interest Purchase and Sale Agreement with energy company Hess Corporation to acquire an additional 28 per cent working interest in Shenzi, a six-lease development in the deep-water Gulf of Mexico. Shenzi is structured as a joint ownership: BHP (Operator, 44 per cent interest); Hess (28 per cent interest) and Repsol S.A. (28 per cent interest).

BHP and Hess have agreed to a purchase price of US$505 million, subject to customary pre and post-closing adjustments.

The acquisition would bring BHP’s working interest to 72 per cent and immediately add approximately 11,000 barrels of oil equivalent per day of production (90 per cent oil).

BHP said the transaction is consistent with its strategy of targeting counter-cyclical acquisitions in high-quality producing or near producing assets.

The company notes that while its strict Capital Allocation Framework tests ensure all investments are resilient to low points in the commodity cycle, they also recognise the potential for price upside over the medium term given the global slowdown in development activity, and are ‘well-positioned to participate in that upside’.

BHP President Petroleum Operations, Geraldine Slattery said the transaction aligns with the company’s plans to enhance its petroleum portfolio by targeted acquisitions in high quality producing deep-water assets and the continued de-risking of 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,” Slattery said.

CEO of Hess Corporation, John Hess, detailed that proceeds from the sale will be used to fund their world-class investment opportunity in Guyana.

“This sale is aligned with our strategy to preserve cash and preserve the long term value of our assets in the current low oil price environment,” he said.

The effective date of the transaction is 1 July 2020 with an expected close by December 2020, subject to the satisfaction or waiver of customary and transaction-specific conditions.