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
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific