BP hives off fracking arm to boost valuation

BP is offloading its United States shale gas business as it looks to cut costs and react more quickly in a "hyper-competitive" market.

The FTSE 100 giant admitted it was likely to shed an unspecified number of staff and contractors in the shake-up of its onshore oil and gas business in the US, which includes conventional as well as shale reserves.

BP said the influx of small, nimble, independent operators that have piled into the US shale gas industry in recent years had greatly increased competition, dragging down prices and unleashing a wave of innovation as companies come up with new ways to squeeze oil and gas from the rocks.

The oil and gas are typically produced using the controversial practice of hydraulic fracturing – or fracking – which releases the hydrocarbon by blasting a mixture of water, sand and chemicals into the rock.

The new business will operate separately from BP, although it will continue to be owned by the company and will not have a separate listing. It is likely to publish separate accounts from 2015 and is expected to retain its senior management team, which is presently headed by Tim Harrington.

"Our overriding goal is to build a stronger, more competitive and sustainable business that we expect will be a key component of BP's portfolio for years to come," BP Upstream's chief executive, Lamar McKay, said.

A BP spokesman added: "The new business is designed to adapt to the rapidly changing and hyper-competitive energy landscape in the region. This move is expected to unlock significant value associated with BP's extensive resource position in the US."

The new business will see BP's onshore oil and gas exploration and production business move from its Westlake campus in Houston, Texas, to a new location in the city.

The group's oil and gas businesses in Alaska and the Gulf of Mexico will not be affected by the restructuring, nor will its refining operation.

"These changes are chiefly intended to improve competitiveness through greater speed of innovation, faster decision making and shorter cycle times from access through to production, together with more efficient cost management," the spokesman said.

A BP spokesman said being a smaller, independent group would allow the new company to make crucial decisions – such as which technologies to focus on and which licences to bid chase – more quickly, by eliminating "several layers of the decision-making process".

Furthermore, it will enable the group to cut costs in a market that is characterised by falling prices.

BP said the restructuring was not related to a US court decision on Monday night that is likely to result in it paying billions of pounds more in compensation claims for the Gulf of Mexico oil spill than it has budgeted for.

The 5th Circuit Appeals Court in New Orleans voted 2-1 for the claims to continue and also said an injunction preventing payments should be lifted. The ruling is problematic for BP because it allows businesses to recover money from BP even if they cannot trace their economic losses to the disaster.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before