BP to pay Devon $7 bln for fields

BP is buying around 240 leases in the Gulf of Mexico, including Devon's 30 percent interest in the major Kaskida discovery, in which BP already has a 70 percent stake.

BP is also adding to its existing interest in the Azeri-Chirag-Gunashli oilfield off the coast of Azerbaijan.

Devon's 5.63 percent stake will increase BP's interest in ACG, which produces 820,000 barrels of oil a day, to 39.77 percent.

The parties will form a 50-50 joint venture to develop BP's 90,000 net acres of oil sands at Kirby, which Devon said could reach peak production in 2016.

ICAP's Smith said this could unlock the potential of Kirby, which has sat dormant in BP's portfolio for years, and would also help secure a crude supply for BP's Whiting refinery, in which it has been investing heavily in recent years.

BP should be able to fund the acquisition out of cashflows or debt, analysts said.

BP's gearing ratio was 21 percent at the end of 2009, against a targeted 20 percent to 30 percent range, while analysts believe the company is highly cash generative at current oil prices.

The cost of insuring BP's debt rose, with five year credit default swaps rising 5.5 basis points to 49.5 bps, according to Markit data.

Deutsche Bank advised Devon Energy on the sale while BP did not use an investment bank adviser.

(Additional reporting by Jane Baird and Michael Erman; Editing by Greg Mahlich, Hans Peters, Dave Zimmerman, Leslie Gevirtz)