BP seeks to calm investors over 'sketchy' plans

Oil company executives attend post-results roadshows to placate nervous shareholders
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The Independent Online

Beleaguered oil giant BP has held a series of private meetings with shareholders to calm nerves over its "sketchy" corporate strategy following loss-making annual results on Tuesday.

A number of investors used the word to describe the details of the "Shrink to Grow" strategy. BP's chief executive, Bob Dudley, implemented the plan to restore the company's global standing after last year's Gulf of Mexico disaster.

On the roadshow to existing and potential investors after the results, which confirmed that BP had lost nearly $5bn last year, executives said, or strongly hinted at, the following:

t that two-to-three joint venture agreements in relatively unexplored Asian markets will be completed before the end of the year;

t that BP's historically high dividend is unlikely to be reintroduced until the end of 2013;

t that the latest disappointing dividend was a result of market caution;

t that executives were shocked at the fury of its existing Russian partners to the $10bn share-swap with Rosneft announced last month.

BP surprised the market by revealing that it would explore the Arctic with Russian state-owned Rosneft. Alfa-Access-Renova (AAR), which owns 50 per cent of BP's existing Russian joint venture, TNK-BP, has since challenged the agreement on the grounds that it breached the terms of their own vehicle.

An investor who attended a meeting last week said: "Reading between the lines, BP execs were suggesting that there were two or three Rosneft-type deals in the pipeline, probably in Asia and quite 'frontier-y' in nature. They were framed in a definitely-this-year context."

Sources interpreted the hints as meaning that the deals would be more traditional joint-ventures, where the parties would fund them in cash rather than through share swaps.

A senior equities trader said that investors were dismayed that the dividend might not improve for nearly three years. BP used to be the most important payer of dividends in the City, accounting for £1 in every £6 given to UK pension funds. Dividends have been on hold since the Deepwater Horizon disaster in April. They were restored last week to about half the previous level, roughly $5bn a year.

BP has to pay $5bn a year into an account to cover any potential liabilities of the disaster until 2013. In effect, this will come out of the usual $10bn a year dividend. BP is understood to have added that the dividend had to be limited while market conditions were difficult and sentiment was against it in the wake of the spill.

A shareholder added that AAR's criticism of the Rosneft deal had clearly bemused the board, as it claimed it had been clear in its intentions during negotiations. However, there was acceptance that the extent of the share swap might have surprised AAR.

Beside last week's results, BP announced plans to sell its Texas City and Carson refineries in the US next year. They are expected to fetch up to 6bn, despite estimates that they would cost around $10bn to build today.

Texas City has been BP's biggest health & safety problem after Deepwater Horizon. In 2005, an explosion killed 15 workers and has cost BP tens of millions of dollars. The company is still on probation for the incident and an inspection by the Occupational Health & Safety Administration in 2009 found 418 additional citations that have yet to be resolved.