BP Plc Chief Executive Officer Robert Dudley expects to drill in the U.S. Gulf for 20 years as the company exploits its experience searching for oil miles below the sea.
“Companies like BP, one of the roles they play in the industry is working in riskier areas,” Dudley, 55, said in an interview at BP’s worldwide London headquarters yesterday. BP “is now going to become incredibly focused on managing the risks, for example, of deep-water. It’s not going to shy away from the risk, it’s going to get even better at it.”
Dudley, who took over from Tony Hayward last month and will present his first strategy update in February, said it will take two years to remake the company after a runaway Gulf of Mexico well caused the worst offshore U.S. oil spill, a disaster projected to cost $40 billion. BP may start paying dividends next year at a lower level than before the spill, he said.
“The idea of coming out in February with a massive firework around strategic direction from BP may sound exciting, but it’s not quite realistic,” Dudley said. “You will likely see an immediate set of steps by BP, and further ones to come in 2011 and 2012.”
BP rose to the highest since Oct. 1 in London today after Goldman Sachs Group Inc. raised its recommendation on the stock to “buy” from “neutral.” The shares climbed 1.8 percent to 439 pence as of the 4:30 p.m. close. The stock is still down a third since the April 20 accident on the Deepwater Horizon rig that killed 11 workers and started the spill.
BP may reduce the number of countries where it produces oil and gas to 16 from 21 after selling assets in countries including Venezuela, Vietnam, and Colombia, Dudley said.
BP has already sold $14 billion in assets in its disposal program. Dudley said the company hasn’t yet decided whether it will sell assets in Alaska’s Prudhoe Bay. Likewise, the company hasn’t yet settled on whether to sell its 60 percent stake in Argentina’s Pan American Energy LLC, which may be worth as much as $9 billion, he said.
BP won’t be the first company to start drilling in the Gulf of Mexico again after President Barack Obama lifted a moratorium last month.
“It’ll take some time into 2011 for companies to get back to work,” Dudley said. “Before we go back to the work in the Gulf, even if the government said it’s okay to go back now, we are going to go through all of our operations and rigs and working processes with great, great detail. We’re not going to rush back into the Gulf.”
That doesn’t mean BP won’t return to the area that accounts for about a tenth of its global output.
“We certainly have a great set of production assets and we have opened up the lower tertiary play in the Gulf of Mexico, which is a two-decade play,” said Dudley. “That’s an important piece of exploration for BP we’re very good at. You’ll see us continue to participate in that.”
Developing reserves in the waters off Brazil will be one of BP’s main objectives as it develops new projects.
The company’s priorities are, “first, meet our obligations in the U.S.,” Dudley said. “Then, we’ve built a growing business in Brazil. We’ve got Shah Deniz in Azerbaijan, we’ve got some U.K. exploration now to go. We’ve got a growing business in Egypt. We will be participating in China.”
Deep-water production accounts for about 18 percent of BP’s global output. The company is the top deep-water explorer in the Gulf and has taken part in more than 40 percent of the area’s large field discoveries in the past decade, according to its website. It also drills from deep-water fields in Angola. In March, BP bought assets in Brazil as part of a $7 billion deal with Devon Energy Corp.
Dudley spent his first weeks on the job travelling to meet partners in China, India, and Azerbaijan. Governments are asking BP to be involved in the energy industry, he said.
“We’re not being shunned as a company,” he said. “We have a long way to go, though, to rebuild trust in the world.”
BP has committed to pay $5 billion a year into a $20 billion escrow fund for claims related to the spill. Dudley indicated that that may lead to lower future payouts in the dividend, suspended for the first three quarters of this year, and the board will review making a fourth quarter payment.
“We may restore a dividend, at a level yet to be determined,” Dudley said. “The company has a unique opportunity to reset both its portfolio and its dividend as the result of this terrible tragedy.”
BP said yesterday profit fell 66 percent after a further charge of $7.7 billion related to the spill, taking the total provision close to $40 billion.