Somebody up there doesn’t like BP. That is one explanation for the failure of its attempt to sell its Argentine business for $7bn. Another – the one that should worry investors – is that BP, under chief executive Bob Dudley, is unable to complete strategic transactions. The unravelling of its joint venture with Rosneft this year was the first sign that something might be amiss; the collapse of the agreement to sell its 60 per cent stake in Pan American Energy to Bridas Corp is another.
There are Argentine-specific reasons for the collapse of the deal. Bridas is jointly owned by Cnooc of China and Argentina’s Bulgheroni family; BP blames their failure to secure regulatory and antitrust approvals in China and Argentina for the impasse. That suggests that the sale became mired in the murky politics of both countries. Bridas blames “the manner in which BP has behaved during the transaction”. So there is no love lost, either. But these are unconvincing reasons for the failure of an important deal.
BP is to repay the $3.5bn deposit Bridas paid it as security for the Pan American transaction (it will also hand over an extra $700m to settle outstanding commercial disputes). This will not affect BP’s gearing – net debt to net debt plus equity – which remains at 19 per cent. But after Mr Dudley raised BP’s disposal target from $30bn to $45bn last month, investors should look closely at execution risk: Pan American represented 15 per cent of that higher target. True, BP is in better financial and operational shape now than it was a year ago, which explains the sideways move in its shares on Monday.