SHARES in BP surged more than 4% after the company's chief executive said it had turned the corner following the disastrous spill in the Gulf of Mexico and highlighted the appeal of the North Sea.
“As our extended turnaround programme moves towards completion, we are seeing production return, particularly from Angola, the UK North Sea and the US Gulf of Mexico, where we produce our higher-value barrels,” Bob Dudley told investors.
Mr Dudley said this month was a landmark for the oil and gas giant, which he claimed was set to achieve sustainable growth that would pave the way for increased payouts to shareholders.
“BP’s year of consolidation is essentially over,” he said. “Q3 is our low point.”
Announcing better than expected third-quarter profits, Mr Dudley said BP had increased the amount it hoped to raise from asset sales to £28.2 billion ($45bn). The company set out to raise £18.8bn ($30bn) following the leak from the Macondo well in the Gulf of Mexico last year, the biggest in US history.
It has provided £25.6bn ($41bn) for the possible costs associated with the leak, including £338m ($541m) in the third quarter. The leak followed an explosion on the Deepwater Horizon rig in which 11 people died.
With BP embroiled in many legal cases connected with the leak, there is significant uncertainty about what the eventual cost will be. If BP is found to have been grossly negligent it could face massive penalties.
The company received a boost last week when its partner on the Macondo licence, Anadarko, agreed to pay £2.5bn ($4bn) to BP to settle all claims related to the incident.
Mr Dudley said the additional disposals would allow BP to re-invest in quality, “higher-growth” opportunities, involving exploration activity and bringing big new fields into production.
Following calls by some shareholders for BP to be dismantled, Mr Dudley confirmed directors had considered the merits of a break-up. Reiterating his belief in the value of BP remaining an integrated global business, he told reporters: “Breaking up for the sake of breaking up is not a strategy.”
He said BP was making good progress with efforts to restore production to the levels achieved before the Macondo leak. Following the spill the company cut production in the Gulf of Mexico and increased maintenance activity in areas such as the North Sea.
Mr Dudley’s comment about the profitability of North Sea production underlined BP’s enthusiasm for the area, where it can reap the full benefit of strong oil prices.
Under production-sharing contracts governing operations in areas such as Russia, BP’s share of output falls when oil prices rise.
The company’s acreage off Scotland includes big fields in deep waters that provide ideal territory in which to deploy the skills acquired by BP over many years in the North Sea.
While the Government’s decision to increase North Sea tax rates in the March Budget was condemned by industry leaders, BP’s bosses believe there could be plenty of money to be made in the province for years to come.
This month BP announced plans to increase investment in the North sea to record levels after getting Government clearance to proceed with the multi-billion pound Clair Ridge project west of Shetland.
Stripping out one-offs, BP made a net profit of £3.33bn ($5.33bn) in the third quarter, compared with an average forecast of £3.14bn ($5.03bn). It made £3.31bn ($5.531bn) in the third quarter of 2010.
Production fell by 12% compared with the same quarter last year, to 3.32m barrels oil equivalent daily.
Shares closed up 19.1p at 457.2p, around 25% below the level before the Gulf tragedy.
BP announced a third-quarter dividend of 7 cents per share.
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