×

BP Has Reached Turning Point: CEO

BP, the oil giant, has reached an "operational turning point" after the Gulf of Mexico disaster, chief executive Bob Dudley told CNBC Tuesday.

Bob Dudley, the Executive Director of BP, arrives at their headquarters in St James's Square on July 26, 2010 in London, England.
Getty Images
Bob Dudley, the Executive Director of BP, arrives at their headquarters in St James's Square on July 26, 2010 in London, England.

"Safety and risk management will be at the absolute heart of everything we do," Dudley, who replaced Tony Hayward following the accident, promised.

He added that the company had a "great future" in the US.

BP has faced a storm of negative publicity and declining output after a devastating spill in the Gulf of Mexico last year.

It is now closer to returning to drilling in the Gulf after its exploration plan was approved by US regulators.

BP reported lower underlying third quarter profits on Tuesday, despite high oil prices, as production fell because of selloffs in the wake of the disastrous oil spill.

However, replacement cost (RC) net profit, which strips out unrealized gains and losses related to changes in the value of fuel inventories, was $5.14 billion in the quarter, compared to $1.85 billion in the same period last year, when the group took a large charge related to the oil spill.

"These results really reflect the decisions we made in January to take down our higher-margin assets for maintenance work," said Dudley.

"During the month of October you can feel the operational turning point as many of those high-margin fields come back on stream."

The oil giant will ramp up the pace of selling off parts of its business this year, with $45 billion worth of divestments by the end of 2013, up from the $30 billion previously planned.

BP has faced a storm of negative publicity and declining output after a devastating spill in the Gulf of Mexico last year.

Investors are awaiting the result of a strategic review of the company, planned for February.

Management said it expected improved cashflow, which they forecast will grow by around 50 per cent by 2014, would, in time, enable the group to pay investors higher dividends and restart a programme of share buybacks.

The company is assuming a $100 per barrel of oil environment in 2014, compared to an average oil price for the first nine months of 2011 of approximately $112.

"We are now looking at $90-100 a barrel," Dudley said.

"We realise there will be some volatility but when you look at the rapidly increasing demand we think this is not unreasonable."

The price of oil has fallen in recent months as fears about a double-dip recession grew. It has risen this week amid optimism about a new deal for the euro zone.

Dudley denied talk of a break-up of the company and said "operational momentum" would return next year.

"This is a great global British company that can develop energy to scale and that's what’s required for success," he said.

"Separating the company for the sake of it isn't the right thing."

"We're going to be a company that plays to our strengths," he said.

"We're good at exploration, good at finding oil and gas, and we’re going to double that. We will also reduce our footprint around the world."

So far, BP has paid out $7.3 billion to victims of the spill.

BP is also battling a number of lawsuits over a proposed deal with Russian giant Rosneft.

"There's some disagreements but fundamentally it's a very good investment," Dudley said of their Russian investment. At one point, he was forced to leave the country when he was working as head of BP's Russian joint venture TNK-BP.