View from City Road: Simon keeps his promises at BP

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The Independent Online
It is hard to believe that tomorrow is the anniversary of the unceremonious departure of Bob Horton from BP. In the last 12 months his successor, David Simon, has improved morale, set targets and enjoyed a 70 per cent rise in the share price.

The disposals announced yesterday provide more proof that Mr Simon can deliver his promises. He promised to reduce debt by dollars 1bn a year and has already raised twice that much from sales in 1993.

As well as dollars 1bn debt repayment, his '1,2,5' tag promised net profits of dollars 2bn a year and capital spending of dollars 5bn. His style - open, accessible and firm, so different from the abrasive Mr Horton - has helped to give both employees and investors confidence that these goals are achievable.

His enthusiasm is infectious and has gone a long way to reviving spirits after the trauma of Mr Horton's exit, a dividend cut and a pounds 500m after-tax loss.

Much now depends on further cost cutting, pan-European talks about rationalising the chemicals industry and the oil price. At least some of these factors are in Mr Simon's control.

Last year was a low point for BP in more ways than one. Then there was concern about the failure to find enough oil to replenish reserves; now there is talk about more discoveries in Columbia, speculation that the find off Shetland may prove to be another Forties and high hopes of Vietnam. Of course, all this could still prove over-optimistic.

But if any of it comes right BP's shares will have far further to rise. So far American investors, encouraged by cash flow, have been most enthusiastic, but British ones are slowly warming up.

If the Government can wait, it should delay selling its remaining 1.9 per cent stake, accumulated to cover bonus shares on the 1987 share sale and worth pounds 323m. The shares, at 311.5p, should be bought.