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 Finland schools: Subjects scrapped and replaced with 'topics' as country reforms its education system
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 4 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
- 5 Zayn Malik quits One Direction: Hundreds of workers request compassionate leave following band member's exit
Germanwings captain Patrick Sondenheimer tried to break into locked cockpit door 'with an axe' as plane was descending
Amanda Knox murder conviction: Italian court overturns verdict for US student and Raffaele Sollecito in the killing of Meredith Kercher
Saudi Arabia says it won't rule out building nuclear weapons
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Germanwings plane crash live: Co-pilot Andreas Lubitz wanted to 'do something people would remember him for'
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...