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March 12, 2010

$7 billion deal with Devon swells BP deepwater portfolio

BP is paying Devon Energy $7.0 billion in cash for assets in Brazil, Azerbaijan and the U.S. deepwater Gulf of Mexico. They include interests in ten exploration blocks in Brazil (seven in the Campos basin) and a major portfolio of U.S. Gulf deepwater exploration acreage and prospects in the U.S. Gulf of Mexico plus an interest in the BP-operated Azeri-Chirag-Gunashli (ACG) development in the Caspian Sea, Azerbaijan.

On completion of the transaction, Devon's employees in Brazil are expected to join BP.

BP will sell Devon Energy a 50 per cent stake in BP's Kirby oil sands interests in Alberta, Canada, for $500 million. The parties have agreed to form a 50/50 joint venture, operated by Devon, to pursue the development of the interest. Devon will commit to fund an additional $150 million of capital costs on BP's behalf.

"This strategic opportunity fits well with BP's operating strengths and key interests around the world, offering us significant additional long-term growth potential with an emphasis on high-margin oil," said BP group chief executive Tony Hayward. "As well as giving us a broad portfolio of assets in the exciting Brazilian deepwater, it will strengthen our position in the Gulf of Mexico, enhance our interests in Azerbaijan and enable us to progress the development of Canadian assets."

Andy Inglis, BP's chief executive of Exploration and Production, said: "Through our entry into Brazil, BP will add a major position in another attractive deepwater basin. Together with the additional new access in the Gulf of Mexico, it further underlines our global position as the leading deepwater international oil company."

The deal will give BP a diverse and broad deepwater exploration acreage position offshore Brazil with interests in eight license blocks in the Campos and Camamu-Almada basins, in water depths ranging from 330 to 9,100 feet (100-2,780 m), as well as two onshore licenses in the Parnaiba basin. The Campos basin blocks include three discoveries -- Xerelete, pre-salt Wahoo and Itaipu -- and the producing Polvo field.

In the U.S. Gulf of Mexico deepwater, BP will gain a high quality portfolio with interests in some 240 leases, with a particular focus on the emerging Paleogene play in the ultra-deepwater. The addition of Devon's 30 per cent interest in the major Paleogene discovery Kaskida will give BP a 100 per cent interest in the project. The assets also include interests in four producing oil fields: Zia, Magnolia, Merganser, and Nansen

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