Will 2013 See a Leaner and Fitter BP?
While the explosion at the Deepwater Horizon drilling rig in 2010 has gone down as the worst oil spill in U.S history, the incident may have made BP (NYSE:BP) a better company. Because the oil and gas producer faced billions of dollars of damage claims after the spill, the company was forced to dispose of its assets in huge chunks. But as a result, BP is a “more focused oil and gas company” with a portfolio “based on high-margin opportunities,” said its American chief executive Bo Dudley, according to the Financial Times.
The company set a target of divesting $38 billion worth of assets by the end of 2013. However, that goal has already been surpassed; including the sale of its half of TNK-BP to Rosneft (RNFTF.PK). Santander analyst Jason Kenney believes that the sales have had a positive effect on the company. “BP is leaner, trimmer, fitter than it was, and the right size to deliver value,” he told the publication.
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BP has made asset disposal, which is a necessity for it, into a business strategy. As part of its transformation, the company has focused on reducing its downstream operations, including selling its Texas City and Carson operations in the United States to limit its involvement in the refining process. In exchange, it has purchased huge swaths of territories to drill, placing its concentration on exploration.
But there are still challenges ahead. Although the company sees itself as changed, investors are not convinced. The company’s shares still trade at a price that is about a third of their pre-oil spill levels and even BP admits that its short-term production has been hurt by the divestments. Its daily output has fallen by 150,000 barrels since last year. While the company plans to begin 15 new projects over the next two years, it has not left its past behind completely. It also faces a civil lawsuit regarding the spill, which will begin in February.
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