ANALYSIS-Catch-up time as BP eyes closure on Russia, spill
LONDON, Oct 25 (Reuters) - International oil company BP , weakened and distracted by its troubles in the United States and Russia, is in danger of losing touch with the leaders in an industry where strength and focus yield the richest pickings. ``I can't help thinking they've sort of lost their way. ''Everywhere you look, they're falling behind,`` said a senior executive of one rival this week. He spoke after BP agreed to swap its Russian assets, a quarter of its worldwide oil output, for $12.4 billion in cash plus 20 percent of the buyer, Russian state oil company Rosneft . The $27 billion deal would end a fraught relationship with the Soviet-born tycoons who co-own TNK-BP with BP. It may or may not solve BP's problems in Russia and could yet unravel, but the company had little choice than to throw its hand in with the government of President Vladimir Putin. Russia, like other resource-rich nations, is anxious to see as much of its oil money as possible staying at home, and is reversing the sell-offs of the 1990s. ''Jury out, as ever, but in fairness to BP, this is a better outcome than many could have hoped for,`` said Deutsche Bank analyst Lucas Herman in a note reiterating his ''buy`` recommendation for its shares. BP is as old as the modern oil industry itself, and has been in far worse scrapes before. A hundred years ago it had run out of money developing oil reserves in Persia (now Iran), and with no customers for its fuel, faced oblivion. ''What a hell of a mess,`` wrote John Cargill, the chairman of its top shareholder at the time. But within a few years the Anglo-Persian Oil Company, as it was then called, had dodged bankruptcy and was back on its feet thanks to wartime fuel demand from the British Navy. In 2012, chief executive Bob Dudley should not need that kind of luck. He runs a profitable company with leading oil and gas positions in U.S. Gulf deepwater, Trinidad and Angola. For future growth, he has exploration acreage in the South Atlantic margins taking in Uruguay, Brazil and Namibia. It's not a hell of a mess, but he might hope better times are ahead, just as they were a century ago. BP has slipped to distant fourth out of five western oil supermajors by stock market value, having ruled the European roost as world number two behind Exxon Mobil in its early 21st-Century heyday. The company also lags its peers by investment valuation measures, as the table below shows. Earnings quality, calculated earnings are likely to be maintained on a scale of 1 to 100.
Company Market cap Historic EV/EBI EV/FC EARNINGS in $ blns PE DA QUALITY* Exxon 416 10.06 4.62 23.15 90 Shell 218 7.33 4.51 21.87 N/A Chevron 215 7.92 3.33 27.70 64 BP 135 5.33 3.21 17.90 27 Total SA 122 7.26 3.22 N/A 38
Data from Thomson Reuters Eikon/analysts reports
SHADOW OF THE SPILL The core reasons for a BP stock market value 'discount', which analysts put in the tens of billions of dollars, are the Russian uncertainties and the looming shadow of potential liabilities for the 2010 U.S. Gulf oil spill. After months of growing expectations that U.S. authorities were moving towards a settlement, in August the
TO-DO LIST On Dudley's to-do list now are production problems in
NO EASY RIDE And BP's rivals have their own crosses to bear; witness Shell's embarrassing stutter in
''We've set out our strategy to 2014 - focusing the company around our strengths, the things we do well - and are making good progress on it,`` said BP in its statement. ''These strengths include exploration, operating in the deep water, developing gas value chains from production to market, and developing and managing giant fields. And looking for valuable barrels rather than simple volumes. Between 2012 and 2014 we expect to bring 15 new major upstream projects on stream that have margins double that of our 2011 portfolio average.`` All music to investors' ears, but some of its rivals have a head start, and they won't be standing still.
(Reporting by Andrew Callus; Editing by