More costs and more writedowns, but Bob Dudley will not break up BP

BP BOSS Bob Dudley yesterday dismissed pressure to break up the business despite a catalogue of problems that forced the oil giant into the red.

The group unveiled more asset writedowns in the US and continuing costs linked to the Gulf of Mexico oil disaster.

However, the chief executive defended the company’s record against critics who have argued that the solution to its difficulties would be to demerge the business.

“I don’t think the company is losing its way whatsover,” he said. “Splitting the company for the sake of splitting the company is not good strategy.”

Some City analysts have argued that a streamlined BP could be split either geographically, or between exploration and production and “downstream” businesses such as refining.

Analyst Richard Griffiths of Oriel Securities said the figures were “testing the faith” of investors.

Dudley’s resistance to change came as the oil giant revealed another $847 million (£538m) provision for the Gulf catastrophe, bringing the total set aside to $38bn (£24.1bn).

BP also took a $4.8bn (£3.1bn) hit for writing down the value of US assets – comprising $2.7bn for the declining value of refineries and $2.1bn for the American shale gas business and the suspension of its Liberty project in Alaska.

Taken together with falling oil prices and production, it meant BP made a loss of $1.4bn (£893 million) in the three months to end-June. That compared with a $5.7bn (£3.6bn) profit in the same period of 2011.

Even stripping out one-off items, the group’s underlying profit slid to $8.5bn in the first half of the year from $11.2bn.

Dudley admitted it had been a “testing” second quarter. Production of oil and gas, excluding results from its Russian joint venture TNK-BP, fell 7 per cent to an average 2.27 million barrels of oil per day.

Dudley had nothing new to say about the company’s dispute with its Russian joint venture partners. It is in talks with oligarch partners in TNK-BP and Russian state-owned Rosneft about

possibly selling its 50 per cent stake. Dudley stressed that BP believed it would continue to play a role in the future of the industry in Russia, “the biggest hydro-carbon market in the world”.

However, he admitted that doubts would continue to hang over the company, whose shares yesterday lost a further 4.4 per cent, or 19.4p, to 425.05p, until it resolved its legacy issues with the Macondo blowout and TNK-BP.

“Until we are able to resolve one or both of these issues we will continue to have higher levels of uncertainty over the company,” Dudley said.

He repeated that despite falling production, which he expected to recover in 2013 and 2014, BP was more interested in value rather than volume in its streamlined business.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “BP has unfortunately surpassed the disappointing scene which had already been set by Shell and Exxon [results].

“Weaker oil and gas prices, impairments including a major writedown on US shale assets and reduced production due to planned maintenance have all conspired to depress profits. The suspension of the Alaskan project, the damage from the Gulf of Mexico spill and the disputed Russian fine provide further uncertainties.”