James Moore: A true turning point for BP fortunes or just another clean-up job to soothe the City?
Wednesday 26 October 2011
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.
- 1 Al Pacino on suffering from depression: 'It can last and it's terrifying'
- 2 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Perez Hilton apologises for Jennifer Lawrence naked photo leak
Victoria Justice on naked photo leak: 'Let me nip this in the bud right now'
4Chan 'nude photo hacker' claims there are hundreds more celebrity images to be published
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Ariana Grande nude photos leak: 'These are completely fake' say singer's representatives
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
iJobs Money & Business
£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...
£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...
£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...
£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...