BP steps up disposal programme to raise $45bn
Bob Dudley hails 'turning point' after $5bn profits and plans to hike dividend
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Wednesday 26 October 2011
BP has reached "a definite turning point" after suffering in the wake of the devastating Gulf of Mexico disaster, the oil giant's chief executive said yesterday as he announced plans to sell off more assets and set the company on course to increase its cashflow by 50 per cent in coming years.
Bob Dudley, who took over after Tony Hayward's departure last year, said he now planned to sell up to $45bn (£28bn) worth of assets by 2013. That is 50 per cent higher than the previous target of $30bn. The business has already agreed sales totalling $26bn as it attempts to move on from the disaster.
There are still challenges ahead, however, in the form of outstanding lawsuits connected to the spill that are scheduled to come to trial in February.
Mr Dudley said BP was open to settlements but "not at any cost".
There is also the potential for fines related to that disaster as well as ongoing legal problems in Russia.
Alongside the news on disposals, he outlined plans to increase cashflow by 50 per cent – half of that will come as payments to the Gulf of Mexico trust fund come to an end – by 2014. The extra money, which assumes an oil price of $100 per barrel in 2014, lower than the current average of about $112, would allow the company to increase payouts for shareholders, he said.
The update on strategy, including plans to invest in higher-margin assets, came as BP revealed $5.14bn in third-quarter replacement cost profits, which strip out the impact of oil and gas inventories. This was an improvement on the $1.85bn seen last year, when the company made provisions for the costs related to the Gulf spill.
For the first nine months of the year, BP – which also announced company veteran Brian Gilvary would take over as chief financial officer in January – notched up $15.9bn in replacement cost profits, compared with a $9.5bn loss in the same period last year.
But production in this year's third quarter fell 12 per cent owing to factors such as higher maintenance, disposals and the lack of activity in the Gulf.
Putting aside disappointment at the ill-fated attempt to engineer an Arctic exploration deal with Rosneft earlier this year, Mr Dudley said BP "had been steadied, turned around and now this month with our high margin assets returning on stream we have reached a clear turning point".
The chief executive argued: "BP's year of consolidation is essentially over...I know we need to rebuild confidence in the company to see its true value reflected in our share price. We have firm plans to make that happen."
Mr Dudley also played down the prospect of BP following its US peer ConocoPhillips, which announced plans to separate its upstream exploration and production business from its downstream arm.
He said: "Breaking up for the sake of breaking up is not a strategy."
The stock market reacted positively, sending BP shares to the top of the FTSE 100 index and up by more than 4 per cent to 457.2p last night. Despite the investor reaction, some analysts were more cautious about the cashflow target. "The 2011 base in this target is heavily impacted by the spill costs and the Macondo trust fund payments," Citigroup said. "Stripping this out, the cashflow growth target to 2014 actually looks broadly flat."
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