BP Doesn't Need Large Acquisition to Replace Reserves -Executives
LONDON-BP PLC (BP BP.LN), which has recently completed a $38 billion divestment program in efforts to streamline the company and bolster its financial position, doesn't need a large acquisition to replace naturally declining reserves, the company's top bosses said Thursday.
Instead, BP has a pipeline of around 45 potential high-quality upstream projects it can develop during the rest of this decade. Of these, BP is particularly focusing on four areas--the Gulf of Mexico, Angola, Azerbaijan and the North Sea, BP Chief Executive Bob Dudley told shareholders at the annual general meeting.
Analysts and bankers have been touting BG Group PLC (BG.LN) as an acquisition target for BP. The company, like many of its peers, is facing an uphill battle to replace its reserves and a large acquisition could be a quick route for BP to lift its reserve replacement ratio, which last year fell to 77%. But Mr. Dudley and BP Chairman Carl-Henric Svanberg said the company has enough big projects coming up to grow the company organically and lift the ratio back up to over 100% this year.
"An acquisition right now would be a big distraction," Mr. Dudley said. "We've restructured the company and now we've got a series of projects we want to bring on. If you do an acquisition you lose that focus," he told reporters after the meeting.
Since the April 2010 Deepwater Horizon explosion in the Gulf of Mexico that caused the worst offshore oil spill in the U.S., BP has sold $38 billion of assets to restructure the company and raise cash to help pay for the billions of dollars of fines, penalties and claims incurred as a result of the accident.
In the divestments since April 2010, BP has sold around half its upstream installations and pipelines, and one-third of its wells, but only around 10% of our proved reserves.
But a temporary moratorium on drilling in the Gulf of Mexico following the 2010 Deepwater Horizon accident and more stringent safety checks at facilities elsewhere prevented the company from doing as much exploration as planned and has resulted in the lower reserve replacement ratio seen last year, Mr. Dudley said.
A number of big final investment decisions are due to be taken this year on projects that will lift the company's reserves ratio, Mr. Dudley said. Potential final investment decisions could include the second phase of development of the giant Shah Deniz gas field in Azerbaijan's Caspian Sea and the Oman Khazzan tight gas field in Oman.
Separately, around 94% of votes cast before the AGM approved the 2012 remuneration report, the highest vote in support of the remuneration report for at least seven years.
The result came as top-10 BP investor Guy Jubb, global head of Government & Stewardship at Standard Life Investments, said he was concerned that BP executives have the potential to receive significant rewards for achieving unchallenging performance targets.
Mr. Jubb, who said Standard Life had voted against or abstained on remuneration-related resolutions at seven out of the last eight AGMs, said he wanted the remuneration committee to address the concerns.
According to the annual report, Mr. Dudley's received salary, cash bonus and other benefits worth $2.7 million in 2012, which was 21.5% less than in 2011 due to the Deepwater Horizon disaster which has cost the company dear in terms of production, profits and fines.
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