Report: BP PLC emerges as leading candidate for Devon Energy’s Gulf, international assets

Report: BP is pursuing Devon Energy assets

BP PLC, Europe’s second-largest oil company, is the leading candidate to purchase assets worth more than $5 billion from independent oil and gas producer Devon Energy, the Wall Street Journal said Wednesday.

BP is expected to buy Devon’s interests in the Gulf of Mexico, offshore Brazil and a stake in its Canadian energy business, the Journal said, citing unnamed people familiar with the situation.

The newspaper said it was unclear if the deal would include Devon’s other international assets.

Devon is considering a number of options, which means any transaction with BP could collapse, the Journal said. Other interested companies were identified as China National Offshore Oil Corp. and Chevron Corp.

Devon spokesman Chip Minty declined comment on the report to The Associated Press.

Devon, which is based in Oklahoma City, put the assets up for sale in November, estimating it would receive after-tax proceeds of $4.5 billion to $7.5 billion.

It began the process of divesting the properties in the first quarter and expects it to be completed by the end of 2010. The company plans to use the proceeds to invest in its U.S. and Canadian portfolio and to retire debt.

BP is the largest leaseholder in the Gulf of Mexico with more than 650 blocks producing about 400,000 barrels of oil equivalent daily. Devon has interests in more than 450 offshore blocks in the Gulf that account for about 7 percent of Devon’s total oil and natural gas production.

In Brazil Devon has interests in 10 offshore blocks covering 1.4 million acres. It has been working with Brazilian oil company Petrobras on five of the blocks. BP completed exploration of two deep-water blocks off Brazil in 2004.

About 60 percent of Devon’s Canadian production is natural gas. Its development plans include exploration of the shale gas play in British Columbia’s Horn River Basin. BP produces over 300 million cubic feet of natural gas daily in western Canada.

Shares of BP rose 15 cents to close at $56.19. Devon shares closed up $1 at $71.85.