BP to Divest Half Its U.S. Refining Capacity
LONDON -- BP today set out a strategic agenda to deliver higher value for its shareholders through increased investment in new access and long-term growth opportunities, and more active portfolio management. Consistent with this, the company announced plans to divest half of its U.S. refining capacity.
This sale will make BP the smallest refiner among its international competitors, with a portfolio focused on fewer but larger and higher-quality refineries and related marketing networks, the company stated.
In an update to investors, BP said its immediate priority is to complete the process of embedding world-class safety and operational risk management at the heart of the group's approach to all its activities and throughout all of its operations. The oil company also reconfirmed its commitment to meet all of the obligations arising from the Gulf of Mexico oil spill, and in relation to its Texas City refinery, ensuring that the lessons learned are applied across the organization.
"2010 will rightly be remembered for the tragic accident and oil spill in the Gulf of Mexico, and it is clear that as a result, BP is a company in transition. I am determined that we will emerge from this episode as a company that is safer, stronger, more sustainable, more trusted and also more valuable," BP group chief executive Bob Dudley said in a statement.
"2011 will be a year of recovery and consolidation as we implement the changes we have identified to reduce operational risk, and meet our commitments arising from the spill. But it will also be a year in which we have the opportunity to reset the company, adjusting the shape of our business, and focus on growing value for shareholders," he continued.
BP said it intends to significantly increase its investment in exploration and to focus its upstream business on opportunities in key oil and gas basins. It also will seek new partnership opportunities where its capabilities and experience can add distinctive value, and will continue to refocus its portfolio for growth and divest assets worth more to others than itself.
In the downstream, BP plans to reshape its business to better reflect the changing patterns of worldwide energy demand, concentrating on growth opportunities in developing and emerging markets, while rationalizing and refocusing its business in mature areas.
Consequently, the company announced its plans to divest two of its U.S. refineries -- Texas City and Carson along with the associated marketing interests -- while continuing to improve its other more competitive refineries in the U.S. Subject to regulatory and other approvals, the company expects to complete both refinery sales by the end of 2012.
In addition, BP today reported its fourth quarter and full year results for 2010. BP's underlying replacement cost profit for the fourth quarter 2010 was $4.4 billion before non-operating items and fair value accounting effects. For the full year, the reported result was a loss of $4.9 billion, including a total pre-tax charge related to the Gulf of Mexico oil spill of $40.9 billion.
BP said it remains on track to meet its target of up to $30 billion of divestments by the end of 2011, having concluded agreements for divestments totaling around $22 billion by the end of 2010. The divestments agreed so far are expected to deliver disposal proceeds more than double their current book value, once completed. The divestment program has not included any of BP’s inventory of future major upstream projects, resulting in a more focused portfolio with the potential for higher growth from a smaller base, according to the company.
BP's oil and gas production in 2011 is expected to be impacted by the ongoing divestment program, higher turnaround activity as long-term integrity programs are delivered, and lower production from the Gulf of Mexico. In total, 2011 production is expected to be around 3.4 million barrels of oil and gas equivalent (boe) a day. For the fourth quarter of 2010, BP's production averaged 3.67 million boe a day, 9 percent lower than 2009.
BP said it intends to focus its downstream business worldwide around integrated positions and higher-performing assets and businesses, which can deliver growth and attractive returns.
"After ensuring we meet all our commitments, we are refocusing BP so that we can increase our investment in its future; investing in reducing risk, in exploration, in new projects, in emerging economies, and in new strategic partnerships," Dudley said in a statement. "In this way, I believe we will create a BP that is both safer and stronger, one that rebuilds value and trust for the long term by doing the right things and doing them well."