Embattled BP to sell £19bn of assets as it falls into the red

BP PUT $30 billion (£19bn) of assets on the sale block yesterday as the embattled oil giant dived into the red for the first time in 18 years due to the Gulf of Mexico oil spill.

•Picture: Getty

The dramatic auction involving about 10 per cent of the group's global oil and gas assets will focus on BP's "upstream" exploration and production (E&P) business.

BP said the sell-off, most of it expected over the next 18 months or so, would leave the company with a "smaller but higher quality" E&P operation.

In addition, group chairman Carl-Henric Svanberg revealed that the company, laid low by the Gulf disaster, planned to cut net debts to between $10bn and $15bn from the current $23bn over the same period.

Dougie Youngson, oil analyst at Arbuthnot Securities, said: "Asset sales were two to three times bigger than we thought but it goes to show BP is going to be a substantially smaller company in the future."

It came as BP set aside $32.2bn to meet the cost of the disaster and confirmed the flagged departure of chief executive Tony Hayward who had annoyed the Americans with a string of PR-gaffes in the wake of the spill. He is to be replaced by BP's American boss Bob Dudley.

The massive spill write-off drove the company to a loss of $17bn for the April-June period, compared with a $3.14bn profit in the same period last year. However, excluding exceptionals dominated by the Deepwater Horizon tragedy, BP said its underlying performance was "very encouraging", with a 72 per cent leap in profits to $5bn.

Jason Kenney, oil analyst at ING in Edinburgh, said: "Overall we see BP being reinvigorated by the new strategy in play, a new CEO and the worst news for the company concerning US Gulf of Mexico costs now being out there."

Richard Hunter, head of UK equities at Hargreaves Lansdown, said: "Significant challenges remain for BP, but the company is moving aggressively to position itself for the tough times ahead."

BP's massive loss is not expected to have a major effect on corporation and other taxes, such as North Sea production revenue tax, it pays in Britain, BP sources said. These amounted to 930 million in 2009, although the sources said it was far too early to say what tax the company would pay here next year.

It is thought the main impact on any tax to be paid may ironically be in the US, due to the losses the British group has sustained as a result of the spill.

BP's strong underlying trading performance was helped by robust growth in oil prices that helped net profit at its Russian joint venture, TNK-BP, jump 21 per cent in the first half of 2010 to $2.43bn on sales up 43 per cent at $20.7bn.

Profits from BP's global "downstream" businesses of refining and marketing tripled in the second quarter to June to $2.07bn from $680m in the same period of 2009 and $729m in January-March this year.

On the London market, BP's shares closed down 10.95p, or 2.6 per, cent at 406p. The company has lost about 45bn in its market value since the explosion that also claimed the lives of several workers.

FROM RUSSIA WITH LOVE

NEW chief executive Bob Dudley is an oil industry veteran, boasting some 30 years' experience who was beaten to the top job at BP by Hayward in 2007.

As a managing director Dudley earned $2.2 million (1.5m) last year and his big task now will be selling more than $30 billion of assets.

Dudley grew up in Mississippi and began his career with Amoco before joining BP when the firm was taken over in 1998.

His most high-profile role was running BP's joint venture in Russia but he had to flee the country in 2008 amid a dispute with his Russian partners and the government. Dudley ended up with a seat on BP's board.