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BP agreed on Monday to sell stakes in a group of Gulf of Mexico oil fields to the Plains Exploration and Production Company for $5.55 billion.

The announcement comes as Robert W. Dudley, chief executive of BP, is raising money to pay cleanup costs and potential fines resulting from a huge oil spill in the Gulf of Mexico in 2010.

He is also trying to use the divestitures to slim down the company and focus more on what he thinks it does best: high-risk, high-return frontier exploration and production, including deepwater fields. The British company has said it is in talks to sell its 50 percent stake in its Russian affiliate TNK-BP.

A sale of older, smaller assets in the Gulf of Mexico would be in keeping with this effort to sell mature fields.

“While these assets no longer fit our business strategy, the Gulf of Mexico remains a key part of BP’s global exploration and production portfolio,” Mr. Dudley said in a statement.

In May, BP said it was marketing its interests in a group of gulf fields, including Horn Mountain, Holstein, Diana Hoover, Ram Powell and Marlin. These fields have production of about 62,500 barrels a day, according to estimates by Stuart Joyner, an analyst at Investec in London. The figure is a little more than a quarter of BP’s gulf production of 240,000 barrels a day in the three months ended June 30.

The sale of the fields does not mean BP is pulling out of the Gulf of Mexico, as the company expects output there to return to growth by 2014.

Mr. Dudley wants to focus on a group of other fields, including Thunder Horse, Atlantis, Mad Dog and Na Kika. BP is now appraising two new fields named Kaskida and Tiber that it thinks could also become major producers.

Oil from the Gulf of Mexico is among the most profitable in BP’s portfolio because of relatively low taxes and exploration and development costs, BP executives and analysts say.

BP had production of just over 400,000 barrels a day in the Gulf of Mexico before the April 2010 explosion at its Macondo well, which killed 11 people on the Deepwater Horizon rig, halted drilling, causing output to fall rapidly.

The latest asset sale puts BP closer to its goal of selling $38 billion in assets by the end of this year, not including the TNK-BP stake.

The company has already sold assets worth about $26.5 billion since the beginning of 2010, Mr. Joyner of Investec said. Last month, BP announced an agreement to sell its Carson oil refinery in California and 800 gasoline stations to Tesoro for $2.5 billion.

The sale of the Gulf of Mexico assets is expected to close by the end of the year.

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BP Plc (BP/), whose Macondo blowout in the Gulf of Mexico caused the biggest offshore oil spill in U.S. history, is drilling the first producing wells at the region’s Atlantis field since a moratorium on deepwater operations was lifted almost two years ago.

The Atlantis and Mad Dog hubs are working again after months of repairs and maintenance, partner BHP Billiton Ltd. (BHP) said in a conference presentation published on its website today. Mark Salt, a spokesman for London-based BP, confirmed that the fields are operational and declined to comment on levels of production.

BP, the owner of the Macondo well that was the source of the 2010 explosion, has lost a third of its market value since the disaster. BP’s output in the Gulf of Mexico, some of the most profitable in its portfolio, has dropped since President Barack Obama banned deepwater drilling for months after the spill and BP instituted stricter safety standards.

Chief Executive Officer Bob Dudley has said he wants to focus more on the Atlantis, Mad Dog, Thunder Horse and Na Kika fields in the Gulf. The company has six rigs working in the region and plans to have a record eight by the end of the year, Dudley said in July.

The Atlantis field, which is drilled using a mobile unit, has a capacity of 200,000 barrels of oil a day and 180 million cubic feet of gas, according to BP’s website. Mad Dog, where the company operates a platform, can produce 100,000 barrels of crude a day and 60 million cubic feet of gas.

BP reported a loss of $1.4 billion in the second quarter. Global output slipped 7.4 percent to 2.3 million barrels of oil equivalent a day.

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BP Plc (BP/)’s plans to sell almost $8 billion of deep-water oilfields in the Gulf of Mexico is paving the way for the biggest influx of Asian-Pacific cash into offshore U.S. energy exploration.

Energy companies eager to hone their skills in advanced drilling techniques such as China Petrochemical Corp. (1314) and the Australian minerals supplier BHP Billiton Ltd. (BHP) are prime candidates as they have deeper pockets than many competitors in North America, according to analysts Lyndon Fagan of JP Morgan Chase & Co. in Sydney and Adrian Loh at Daiwa Capital Markets.

Cnooc Ltd., the publicly traded unit of China’s offshore oil explorer, is poised to become the first Chinese operator of deep-water U.S. oil assets, pending government approval of its $15.1 billion takeover of Canada’s Nexen Inc. Photographer: Nelson Ching/Bloomberg

Asian bids for BP wells that extend miles beneath the sea surface could preempt the handful of U.S. and European explorers that have dominated Gulf drilling for almost a century. In similar fields, U.S. prospectors McMoran Exploration Corp. (MMR) and ATP Oil & Gas Corp. are coping with exploding costs and mounting geological challenges, like violent natural gas surges and drill bits melting as they plunge miles into the ocean floor.

“The Gulf of Mexico ticks a lot of boxes for oil companies” from Asia, according to Loh, who follows Chinese companies for Daiwa in Singapore. “The size of the resource is certainly an attraction as well,” he said in an interview.

The U.S. section of the Gulf, while producing 17.8 billion barrels of crude in the past six decades, is a more difficult and expensive place to search for oil as explorers push farther off the coast and into more hostile geological formations.

ATP Bankruptcy

Spiraling costs pushed ATP into filing for bankruptcy protection last week. The Houston-based company was one of the first explorers to resume drilling in deep waters of the Gulf after London-based BP’s Macondo oil spill, which was caused by an uncontrolled burst of natural gas.

McMoran spent $906 million in the past three years on a field called Davy Jones that has yet to produce commercial quantities of oil.

Even so, Gulf oil production is expected to jump 31 percent by the end of the decade to 1.83 million barrels a day, the U.S. Energy Department said in a June report.

That’s three times the rate at which Africa and Russia are expected to raise oil production during the same period, and more than twice the forecast increase from Saudi Arabia, according to the U.S. Energy Department. It forecast U.S. Gulf crude prices to climb 34 percent by the end of 2020.

Lv Dapeng, a spokesman in Beijing for China Petrochemical, also known as Sinopec Group, did not answer two calls to his office line seeking comment yesterday. The company had the equivalent of $6.68 billion in free cash flow at the end of 2010, the most recent year reported, according to data compiled by Bloomberg.

‘Limited Pool’

Kelly Quirke, a Melbourne-based spokeswoman for BHP, declined to comment.

“The potential buyers have to have the technical knowledge needed to operate in deep water, and there’s only a limited pool of such companies,” Gianna Bern, president of Chicago-based Brookshire Advisory & Research, said in an interview. “It boils down to who has the expertise and who has the deep pockets.”

One attraction of Gulf assets for Chinese companies is the transparency of U.S. regulations and taxation relative to other nations, Loh said. “If you want to drill and develop an oil field it’s easier than, say, in Africa,” he said.

Cnooc Ltd. (883), the publicly traded unit of China’s offshore oil explorer, is poised to become the first Chinese operator of deep-water U.S. oil assets, pending government approval of its $15.1 billion takeover of Canada’s Nexen Inc. (NXY) Cnooc has pledged to retain Calgary-based Nexen’s drilling experts as part of the transaction announced on July 23.

Track Record

“Chinese oil companies do not have a good track record in developing deep-water projects themselves,” Gordon Kwan of Mirae Asset Securities, said in an interview. “That’s the reason why Cnooc promised to retain all of Nexen’s operational staff in the Gulf of Mexico and not try to send Chinese engineers over.”

BP said it May it plans to divest Gulf fields including Horn Mountain and its minority stake in Ram Powell, about two years after a blowout at its Macondo well in the Gulf killed 11 workers and triggered the worst-ever U.S. marine oil spill. The company expects maximum proceeds of $5 billion to $6 billion after taxes payable by the purchaser, a person familiar with the sale process said last week.

The fields hold proven reserves of about 120 million barrels of oil and produced about 58,000 barrels a day in the first quarter, the person said. In addition to Sinopec Group and BHP, other potential suitors include Woodside Petroleum Ltd. (WPL), Australia’s second-largest oil company, and China National Petroleum Corp. or its unit PetroChina Co. (857), analysts said.

U.S. Clearance

Chinese companies may wait to pursue deals in the Gulf until Cnooc’s Nexen purchase clears regulatory hurdles, including the Committee on Foreign Investment in the United States, Kwan said. U.S. political resistance in 2005 prompted Cnooc to abandon a bid for California-based Unocal Corp., now part of Chevron Corp. (CVX)

“If the Cnooc-Nexen deal could be cleared, there should be no problem for Chinese companies bidding for BP assets,” Kwan said. Because any deals with BP would involve individual assets rather than an entire corporation, “I don’t think this would be subject to the same level of vigilance Cnooc-Nexen deal would get from the U.S.”

BHP, Australia’s largest oil and natural-gas producer, already operates the Shenzi and Neptune fields about 120 miles (193 kilometers) off the Louisiana coast. The company also is a partner with BP in the nearby Mad Dog and Atlantis projects.

The BP fields for sale “are attractive tier-one assets that fit within BHP’s strategy that rarely come up for sale,” said Fagan, the JPMorgan analyst.

Worth Looking

Woodside began exploring in the Gulf of Mexico in 1999 and has 20 percent stakes in the Neptune and Power Play oilfields, according to the company’s website.

“I think Woodside and BHP would definitely take a look” at adding Gulf of Mexico assets, said Andrew Williams, a Melbourne-based analyst at RBC Capital Markets.

For Woodside “at some point you’ve got to make the decision, do we get bigger or get out?” Williams said by phone. “If they want to get bigger, they have to look at it.”

Woodside, operator of the A$15 billion Pluto natural-gas project in Western Australia, said in February it’s considering expansion outside the country through new partnerships.

Laura Lunt, a spokeswoman for Woodside in Perth, said the company doesn’t comment on speculation.

One person familiar BP’s plans said bidders may include U.S. companies such as Chevron Corp. and Exxon Mobil Corp., and that it’s unlikely that all the fields will go to one buyer.

‘Rock Star’

Other U.S. producers tested by the vagaries of Gulf drilling have included McMoran and Cobalt International Energy Inc. (CIE) Despite the setbacks at the Davy Jones project, McMoran Chairman and Co-Founder James “Jim Bob” Moffett retains “rock star” status within the oil industry, Brookshire’s Bern said.

On the sidelines of a Denver energy conference last week, Moffett’s informal question-and-answer session with investors and geologists drew a standing-room only crowd.

Cobalt, controlled by Goldman Sachs Group Inc. and Riverstone Holdings, lost $99 million on its Ligurian field in the Gulf during the second quarter. The Houston-based company, which also explores off the coasts of Angola and Gabon, plans to continue deep-water Gulf exploration with its North Platte 1 well and the Anadarko Petroleum Corp.-operated Shenandoah field, according to a July 31 company statement.

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BP PLC is asking for up to $7.9 billion for some of its oilfields in the Gulf of Mexico as it continues to sell assets after the 2010 oil spill, according to Bloomberg News.

According to the report Tuesday, which cited two people with knowledge of the matter, BP could clear up to $5 billion to $6 billion after the buyer pays taxes.

BP declined to comment on financial terms of a sale but said that it intends to remain the largest oil and natural gas producer in the Gulf.

“No one should confuse our effort to sell these older, non-strategic assets, which we announced months ago, with our ongoing commitment to the Gulf of Mexico,” said spokesman Brett Clanton. He said BP still plans to invest at least $4 billion per year over the next decade in the Gulf.

The company has six rigs in the Gulf now and plans to have eight by the end of the year, an all-time high.

Shares of BP rose 18 cents to $42.27 in afternoon trading.

London-based BP hopes to sell $38 billion worth of assets by the end of 2013 to help pay the costs of cleaning up the Gulf oil spill.

On Monday, BP announced it agreed to sell a refinery in Carson, Calif., and pipelines and Arco-branded gasoline stations to Tesoro Corp. for $2.5 billion. BP also said it was selling two gas-processing plants in Texas. Those sales had been expected for a long time.

The Tesoro deal brought BP’s asset sales to $26.5 billion since the April 2010 Gulf oil spill.

BP leased the Deepwater Horizon rig that exploded while drilling a well off the Louisiana coast, killing 11 workers and triggering a largest offshore oil spill in U.S. history. More than 1 million damage claims have been filed with a court-supervised settlement program. BP expects to complete payments into a planned $20 billion trust by the end of the year.

BP said this spring that it had marked for sale its interests in Gulf fields known as Marlin, Horn Mountain, Holstein, Ram Powell and Diana Hoover. Bloomberg said the fields hold proven reserves of 120 million barrels of oil and produced 58,000 barrels per day in the first quarter. It said potential bidders could include Chevron Corp. and Exxon Mobil Corp.

CEO Robert Dudley said last month that the company’s Gulf strategy would focus on four major fields: Thunder Horse, Na Kika, Atlantis and Mad Dog.

In July, BP reported a second-quarter loss of $1.4 billion on lower oil prices, falling production and write-downs of assets including shale-gas holdings in the U.S. The loss was larger than analysts expected and a reversal from profit of $5.7 billion a year earlier.

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Traveling by airboat through the Delta National Wildlife Refuge on Wednesday, Interior Secretary Ken Salazar repeated the Obama administration’s commitment to using large chunks of money paid by BP to rebuild Louisiana wetlands. Salazar asked Garret Graves, chairman of Louisiana’s Coastal Protection and Restoration Authority, whether it might make sense to use part of the BP money paid in the aftermath of the Deepwater Horizon oil spill for a half-dozen freshwater and sediment diversions that the state has included in its master plan for coastal protection and restoration.

Salazar said the administration is supporting the Restore Act, which would dedicate 80 percent of any fines levied against BP and other responsible parties to restoration projects in Gulf states. But he said the Justice Department also is attempting to ensure that any settlement of legal claims now pending in federal court in New Orleans would include similar requirements to spend money on restoration projects.

Salazar’s impromptu five-hour tour of Louisiana’s coastal erosion problems followed his kicking off the Bureau of Ocean Energy Management’s successful sale of leases in the central Gulf of Mexico.

During the flight, he mused on the complaints raised over the past two years by Republicans, including Gov. Bobby Jindal, about the speed at which oil and gas production has returned to the Gulf.

“I think that the attacks of the Republican Party on what was done in the Gulf are simply wrong,” Salazar said. “They don’t stand up to the truth of the light of day.

“The number of permits that have now been issued, and the rigs that are operating out here in the Gulf of Mexico, the bids we saw this morning in the lease sale in the central Gulf, all are measurements that should tell the world that the Gulf is back in business and doing well,” he said.

Salazar said the administration’s efforts to resume drilling in the Gulf in a responsible manner match its efforts to ramp up regulation of drilling for natural gas and oil in deep shale deposits, using a method called hydrofracturing or “fracking.”

He said federal officials are on track to require release of information about the chemicals used to fracture the hard shale deposits, while promoting the method to produce enough natural gas to meet the nation’s needs for the next 100 years. The cheaper prices for natural gas resulting from the new exploration method have been seen as an opportunity by the administration to push big business to switch their commercial fleets to natural gas, he said, which will result in the production of less greenhouse gases.

Salazar passed over the rapidly eroding Chandeleur Islands and Breton Island, which are part of the Breton National Wildlife Refuge.

Unusual high tides that prompted coastal flood warnings on Wednesday made the remaining barrier islands look even smaller from the air.

Breton Island was home this spring to between 35,000 and 40,000 royal and sandwich terns, and between 3,000 and 4,000 brown pelican nests, said Fish & Wildlife Service biologist James Harris. But he said erosion continues to challenge nesting birds.”We lost about 3,000 from early flooding, but we’re building that number back up from some re-nesting and some late nesters,” he said.

Salazar said he hopes to talk to Fish & Wildlife Service officials about a restoration project for the Chandeleurs among projects that BP and other parties may have to pay for as part of the Natural Resource Damage Assessment process required under the Oil Pollution Act.

Projects viewed during a boat tour included one where sediment dredged from the Mississippi River by the Army Corps of Engineers is being used to rebuild a platform for freshwater wetland grasses. Where the dredged material has been in place for a year or more, a lush array of marsh grasses has popped up.

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BP has started production at a key new oil operation under more than a mile of water in the Gulf of Mexico, where it expects production to peak at 60,000 barrels a day of oil equivalent, the company says.

Production started up on June 3 at the Galapagos development, which now includes three wells that BP owns jointly with Noble Energy, Red Willow and Houston Energy, BP said.

It is located about 140 miles southeast of New Orleans, far from its namesake Galapagos Islands in the Pacific Ocean, and is under about 6,500 feet of water.

The project began development in 2006. One of its wells, the Santiago, was the first to receive a permit after the federal government lifted a deep-water drilling moratorium it imposed following the deadly 2010 oil spill at the BP-owned Macondo well.

”The start-up of this project in the Gulf of Mexico is one of BP’s key operational milestones for 2012,” CEO Bob Dudley said in a statement.

Despite the 2010 spill, for which the company is still engaged in restoration efforts and settlement negotiations, BP has continued to bank on major hydrocarbon developments in the Gulf.

The company said it is the largest leaseholder in the Gulf, with more than 650 leases, and has interests in more than 20 fields there.

James Dupree, regional president of BP’s U.S. Gulf of Mexico business, said in a statement that Galapagos ”reflects the potential we continue to see in this world-class basin, now and in the future.”

The Galapagos development includes the Isabela, Santiago and Santa Cruz fields.

Noble Energy discovered the Santiago prospect last year. It is operating the Santiago and Santa Cruz fields, while BP is operating the Isabela field, BP said.

BP has a 56 percent stake in the project. It is the first new Gulf development to come online for BP since the spill, although the company has drilled and begun production at a new well this year in the existing Thunder Horse development.

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