This article has been adapted from our sister site across the pond, Fool U.K.
In October 1970, BP (NYS: BP) found a (black) gold mine when it discovered the vast Forties oil field in the North Sea. The following year, BP's biggest domestic rival, Royal Dutch Shell (NYS: RDS.B) followed suit, finding the huge Brent oil field east of the Shetland Isles.
Thus began the golden age of North Sea oil.
A long way to run
Forty years after the North Sea oil boom really took off, it's estimated that half of its reserves have been extracted. With extraction becoming increasingly more challenging technically, some pundits predict a rapid withdrawal from the North Sea by BP, Shell and other oil majors.
However, BP yesterday fought back against the "fading" of North Sea fields by announcing a major new investment. Claiming that the North Sea story still has a "long way to run," the petro-giant is to invest 4.5 billion pounds in a major new project.
Having won government approval, BP and three partners -- Chevron, ConocoPhillips, and Shell -- will invest 10 billion pounds in expanding the enormous Clair field, west of Shetland. This investment will fund four new projects over the next five years, aimed at ramping up production from this acreage.
Not dead yet
This is the biggest single sum BP has ever invested in North Sea exploration and production, prompting its chief executive Bob Dudley to state,
"Although it began over 40 years ago, the story of the North Sea oil industry has a long way yet to run. BP has produced some five billion barrels of oil and gas equivalent so far from the region and we believe we have the potential for over three billion more."
The FTSE 100 firm reckons that this outlay will create up to 3,000 new jobs, as well as supporting over 3,500 jobs in BP's existing North Sea operations. What's more, this news comes on the back of BP's plans announced earlier this year to spend 3.7 billion pounds on redeveloping two of its other North Sea assets.
Politicians and share prices
Always keen to seize on good news in these tough times for the U.K. economy, politicians eagerly jumped on the BP bandwagon.
Prime Minister David Cameron praised BP, remarking:
"I am delighted to give the go-ahead for this project. This investment is great news for Aberdeen and the country and provides a massive boost for jobs and growth. It shows the confidence that there is to invest in the North Sea - we have cutting-edge technology, world-class skills and expertise and a UK Government that is committed to do what we can to secure future investment."
Alex Salmond, Scotland's First Minister, added,
"This massive new investment by BP and its partners is extremely welcome and confirms that the offshore industry has a key role to play in generating jobs, skills and revenue for decades to come."
It's all very well for politicians to welcome this news, but what effect did it have on BP's share price? As it happens, BP's shares fell 6p on Thursday in a generally weak market, but gushed 11p to 417p on Friday. In short, BP shareholders seem to have taken this news in their stride.
At 417p a share, BP is valued at 79 billion pounds and trades on a forward price-earnings ratio of 5.6. Its shares offer a forecast dividend yield of 4.4%, covered 4.2 times.
These are strikingly low ratings for a world-leading corporation, largely because of BP's year of shocks. However, with its future looking decidedly rosier than its recent past, value investors should "load up the lorry" with BP!
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