BP PLC has signalled it is back on “the right path” two years after the Gulf of Mexico tragedy, raising its dividend for the first time since it resumed payouts a year ago and hailing the return of “operational momentum.”
With less than three weeks before the start of the civil trial in New Orleans to resolve damages over the accident, BP chief executive officer Bob Dudley reiterated the U.K. oil group was willing to settle “on fair and reasonable terms.”
Mr. Dudley sought to draw a line under the recent crisis, laying out a set of “milestones” for the coming year, including the drilling of 12 exploration wells, the startup of six exploration and production projects and a capital expenditure program of about $22-billion (U.S.). BP had made good progress on putting down foundations for a more centralized structure that was already enabling a global risk and safety approach to big projects, Mr. Dudley said.
“It’s probably been the biggest organizational change that BP has made in 20 years,” he said. The new slimmed-down BP, he added, was choosing “value over volume … strategic assets over non-core … choosing not to try to be the biggest but over time aspire to be the best”.
The more confident tone came as BP, which used to account for £1 ($1.58 Canadian) in every £6 invested by pension funds, announced a 14-per-cent increase in its fourth-quarter dividend – to 8 cents a share.
Underlying replacement cost profit for the fourth quarter, which strips out the value of oil and gas inventory and adjusted for one-off items, was $5-billion (U.S.). The result compared with $4.4-billion a year earlier. Replacement cost profit was $7.6-billion, up from $4.61-billion in the same period a year earlier. For the full year, underlying replacement cost profit was $21.7-billion, compared with $20.5-billion for 2010.
Operating cash flow was $22.2-billion, up 63 per cent compared with 2010. Mr. Dudley confirmed BP’s expectation that its net cash flow in 2014, in a $100 oil price environment, would be about 50 per cent higher than in 2011. Production rose by more than 5 per cent, or 170,000 barrels of oil per day, from the third to the fourth quarter although Mr. Dudley warned that he expected underlying production for 2012 to be broadly flat, excluding its Russian joint venture TNK-BP.
BP’s shares, which remain approximately 30 per cent down from the time before the accident on 20 April, 2010, fell 0.86 per cent to £4.85 in London.
Mr. Dudley insisted that the continuing poor performance had little to do with a lack of perceived momentum by investors – “operational momentum is there … you can feel that” – but conceded that the biggest uncertainty was the impending litigation in the U.S. over the accident.
Shareholders, he said, were giving BP “a spectrum of advice” on whether to settle or not. The company, he added, had “always had a bias towards settling, but not at any cost.” The company, whose pretax charge for the spill costs and provisions totalled $37.2-billion in 2011, has consistently denied it was grossly negligent.