Stephen Foley: BP boss is right to reject quick fixes
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Wednesday 27 July 2011
Outlook Having got himself embroiled in an embarrassing debacle in Russia, Bob Dudley is understandably reluctant to countenance other hasty decisions on strategy at BP, and investors should be grateful rather than grumbly about that.
There are good reasons for the discount to the sector at which the oil giant's shares are trading. Lest we forget, it was only a year ago this month that BP finally managed to plug its gushing Macondo well, with enormous clean-up operations and undersea engineering challenges still before it.
The announcement and subsequent collapse of its tie-up with Rosneft, which would have made the riches of the Russian Arctic available to replenish BP's oil and gas reserves, has served to highlight the company's relatively mature portfolio of production assets. That BP has been unable to make the most of its currently producing assets, with maintenance costs among the reason for yesterday's profit miss, only adds to the pressure on Mr Dudley, 10 months into his tenure as chief executive.
But the suddenly fashionable idea of splitting oil companies' exploration and production activities from their refining operations (à la Marathon Oil and Conoco-Phillips) is no panacea for BP. It is in the process of selling off several of its biggest refineries, and it has to resolve the future shape of its E&P activities before investors will get excited about being invested solely in these. Instead, bolt-on additions to production in Indonesia, Trinidad and Australia will improve matters next year. Share buy-backs and a restoration of the dividend to pre-crisis levels look a more sure-fire way to bolster the share price while Mr Dudley rights himself from the Rosneft fiasco.
Yesterday's figures showed the bill for the spill rising again, by another $500m, though that is offset by contributions from BP's partners in the well, extracted through some legal strong-arming. The timing of a resumption of drilling in the Gulf of Mexico is still hard to predict, given the regulatory hurdles and the political sensitivities involved, though this year seems likely. BP's share price reflects real uncertainties still to be resolved, but time will do much of the healing. The stakes are high. Mr Dudley ought to resist impatient investors' calls for big bangs and quick fixes.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...