BP's Sale of Pan American Stake Collapses (Update1)

BP's(BP) planned $7.1 billion sale of a stake in Pan American Energy to CNOOC Ltd.(CEO) has fallen apart.

Bridas Corp., which is owned by China's CNOOC and by the Bulgheroni family of Argentina, said Saturday that it scrapped the transaction, citing legal reasons and BP's behavior during deal talks, Bloomberg reported.

In a news release, BP confirmed that it received a letter Saturday from Bridas canceling the transaction, which was originally nailed down late last November.

BP said the deal had been delayed because Bridas Corp. had failed to obtain Argentine antitrust and Chinese regulatory approvals.

"Under the terms of the agreement, Bridas Corporation had exclusive responsibility for obtaining these approvals." BP said.Pan American Energy is an Argentinean crude oil producer. BP had agreed to sell its 60% stake in it to Bridas as part of a divestment program aimed at shoring up its balance sheet in the wake of the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

About one year ago, BP had estimated its total costs related to the catastrophic spill would be nearly $40 billion.

But BP says its financial condition has improved significantly over the past year, and that it will keep its stake in Pan American Energy.

"PAE is a strong business," the company said in the news release. "BP is happy to return to long-term ownership of these valuable assets, given the considerable improvement in its own financial strength and circumstances, as well as the improved external trading environment."

The London-based petroleum company said it will soon repay the $3.53 billion deposit it received from Bridas at the end of last year. BP says the deposit was held as short-term debt so its repayment will not affect BP's gearing (the ratio of its net debt to net debt plus equity), a measure of the company's leverage. The ratio stood at 19% at the end of September.

BP last month annou! nced tha t it intended to extend its divestment program to $45 billion by the end of 2013.

But in Sunday's news release, the company said the program is now focused on jettisoning nonstrategic assets, not on raising cash.

"As such, BP does not currently plan to divest additional assets to offset proceeds which would have been received from the PAE transaction," the release said.

Shares of BP finished Friday down 17 cents, or 0.4%, at $43.85. Shares of CNOOC ended the session up 36 cents, or 0.2%, at $195.04.