James Moore: A true turning point for BP fortunes or just another clean-up job to soothe the City?


Outlook So Bob Dudley, BP's American chief executive, thinks the business has reached "a definite turning point". Is he right? The good news has hardly been gushing forth from the group's wells, but there has been a drip, drip of better tidings. Yesterday seemed a case in point. Third-quarter profits, for example, were (a bit) better than the City had expected. Production hit a low point but should pick up from here.

Mr Dudley even offered a banana or two to the company's restive shareholders, with the prospect of improved dividends and more share buybacks. These are the intended rewards from the strategy he spelt out, which will see the group focusing on his idea of its strengths: deepwater operations (yes, really), exploration, managing giant fields, etc.

He's also promised to invest in the business and pay close attention to safety. Too little focus on the latter at the expense of keeping the City happy was where the seeds of the company's recent travails were sown under the tenure of Lord Browne.

All well and good, then. But it's premature to be talking of turning points and there is plenty of evidence that Mr Dudley's bold assertion might be just so much spin to get the City to pipe down for a while.

BP appears to be operating a very conservative balance sheet, with a multi-billion-dollar cash pile and low gearing. The company is also raising its target for divestments to $45bn (£39bn) from $30bn, generating more cash.

It is true that compensation claims from the Gulf of Mexico spill's victims have slowed, and just last week BP settled with Andarko, one of the minority partners in the stricken well, which has dropped its claim of gross negligence and paid $4bn into the compensation fund (thereby putting pressure on Halliburton and Transocean, the remaining contractors, to do the same).

But there's still a civil case next February and the US Department of Justice to deal with. Being found "grossly negligent" would be a kick to the stomach. America's legal system isn't renowned for having much sympathy for foreign companies even if they're run by Americans and mostly owned by Americans too.

Then there's the continuing fallout from BP's ill-fated attempt to forge an alliance with Russian oil giant Rosneft and the possibility of costly lawsuits from aggrieved partners in the Russian TNK-BP joint venture.

Perhaps all this explains just why BP is operating such a conservative balance sheet. It might need the cash.

Most of the foul black gunk that gushed from Deepwater Horizon has now been removed from the beaches of Louisiana, but locals are still licking their wounds and as the US presidential campaign heats up no one will shed any tears if BP gets another beating.

So let's just wait a little while before judging whether Mr Dudley is right to say that BP has turned a corner and the black gunk has been cleaned off his company's green logo.

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