BP raises disposals target to $45bn

Bob Dudley, pictured in July, said "Our operations are regaining momentum and we are facing the future with great confidence."

Story highlights

  • It's raised its target for disposals to $45bn and promised to boost pay-outs to shareholders
  • They reported replacement cost profit of of $5.14bn for the third quarter
  • The result was down by 3 per cent from the previous quarter
BP has raised its target for disposals to $45bn and promised to boost pay-outs to shareholders as the UK oil group said it had reached "a definite turning point" after last year's devastating Gulf of Mexico spill.
The higher divestment target -- up by $15bn from a previous level of $30bn -- came as BP reported replacement cost profit, which strips out the value of oil and gas inventory, of $5.14bn for the third quarter, slightly higher than expected.
The result was down by 3 per cent from the previous quarter, but higher than the $1.85bn it reported in the same quarter last year when the company took a large charge related to the Gulf of Mexico spill.
Production for the period was also lower, slumping 12 per cent to 3.31m barrels of oil equivalent a day compared with the same period last year, as the group conducted more maintenance, the continued absence of drilling in the Gulf of Mexico, as well as divestments. Production in the fourth quarter is expected to be higher.
"Our operations are regaining momentum and we are facing the future with great confidence," Bob Dudley, chief executive, said in a statement, adding that the group would build on its "strengths to substantially grow operating cash flows, allowing us to directly increase returns to shareholders as well as invest for future growth".
Mr Dudley, who has come under pressure from investors for failing to inject momentum into the group and providing sufficient clarity on its priorities, promised a strategy of "focused investment" and "managed portfolio".
Setting out more details on BP's future strategic direction, Mr Dudley said the group would focus investment on its strengths such as exploration, deepwater operations, the management of giant fields and building gas value chains.
The company would also continue to develop its refining and marketing operations, underlining its commitment to the business and appearing to reject calls from some quarters for a break-up.
Mr Dudley also heeded calls from some investors to provide firmer targets for BP's annual operating cash flow, which he expects to grow by around 50 per cent by 2014. The target assumes a $100 a barrel oil environment in 2014, compared with an average oil price for the first nine months of 2011 of around $112 a barrel. Around half of the improvement is expected to come from ending payments into the $20bn compensation fund BP set up to help pay for costs related to last year's spill.
Peter Hutton, analyst at RBC Capital Markets, welcomed the positive comments but cautioned that "until drilling permits are achieved, perhaps a little premature".
BP also announced that Byron Grote, its long-standing chief financial officer who helped steer the group through the gulf crisis last year, would retire from his position in January. He will be replaced by Brian Gilvary, his current deputy. Mr Grote will continue as a member of the BP board in a new role as executive vice president responsible for the company's alternative energy and shipping businesses, as well as its technology activities.
The higher cash flow, together with increased divestment proceeds, would allow BP to maintain a strong balance sheet as well as enabling it "to target higher distributions to shareholders, considering both dividends and share buy-backs", Mr Dudley said.
"BP is still not in a position to arrest the decline in volumes in the US, in our view. US crude volumes were down 31 per cent year-on-year, down 16 per cent even on last quarter. Until BP can actually get in and drill, decline is accelerating," said Mr Hutton.
Shares in BP rose 19.9p or 4.5 per cent to 458p in morning trading in London.