Dudley hails ‘turning point’ as BP steps up sale of assets

EMBATTLED oil major BP has reached a “definite turning point”, its chief executive yesterday declared, as he upped an asset sell-off programme introduced in the wake of last year’s Gulf of Mexico disaster.

BP’s shares jumped more than 4 per cent as the City appeared to agree with Bob Dudley’s bullish assertion, even though production took a 12 per cent dive during the last quarter.

The BP boss, who has been under fire since the collapse earlier this year of a deal with Russian firm Rosneft to explore in the Arctic region, admitted the past three months had been a “low point” from a production perspective, but added: “BP’s year of consolidation is, essentially, over.”

The assets sale will be increased from $30 billion (£18.8bn) to $45bn, while the oil and gas heavyweight also intends to raise cash generation by 50 per cent over three years. It expects this to be met through further exploration projects, with 17 schemes due to come onstream before 2014.

Half of the cash-flow target will be hit when payments to a $20bn Gulf of Mexico trust fund end at the end of next year, 12 months ahead of schedule. Dudley denied that he was building up the company’s cash reserves in preparation for a trial next year over the Deepwater Horizon disaster, which marked the biggest oil leak in United States history. He insisted that the group was preparing “vigorously” for the case.

Although there was general agreement in the Square Mile that BP – which has been the subject of takeover talk since the crisis 18 months ago – is moving towards a sounder footing, Tony Shepard of Charles Stanley warned the Gulf of Mexico spill will remain a “major issue”, with questions of negligence and levels of fines yet to be answered.

However, analysts at Killik & Co said: “Although the extent of the group’s financial liability in the Gulf of Mexico remains uncertain, recent settlement agreements and the conclusions of investigations provide greater optimism over the final outcome.”

BP yesterday unveiled a “replacement cost profit”, on a reported basis, of $5.14bn for the three months to the end of September, compared with $1.8bn during the same period last year when it faced hefty charges for cleaning up the oil spillage. Production slipped to 3.319 million barrels due to the suspension of production in the Gulf, but it is expected to improve during the closing three months of the year.

“The company has steadied, turned round and now, this month, with high-margin assets returning on stream, we have reached a clear turning point,” Dudley said. A detailed strategic plan will be released in February, which will include an update on the BP’s dividend policy. It yesterday held its quarterly dividend at 7 cents per share.

Dudley took over from Tony Hayward last year to smooth over problems in the wake of the Deepwater Horizon catastrophe, which claimed the lives of 11 oilrig workers.

But he has also found himself in the spotlight following the failure of the Rosneft deal, which later saw the Russian company strike an agreement with US major ExxonMobil.

Reports yesterday suggested that the management board of British-Russian oil firm TNK-BP is seeking to sue BP for billions of dollars in damages over the botched alliance with Rosneft.