BP to Form Separate Unit to Manage U.S. Onshore FieldsWill Kennedy and Brian Swint
BP Plc, the third-largest European energy producer by market value, will form a separate business to manage its onshore oil and natural gas assets in the continental U.S. to make them more competitive.
BP will continue to own the new organization, which will operate with its own management team at a different Houston office and will have separate financials starting in 2015, the London-based company said in a statement today. The unit has the equivalent of 7.6 billion barrels of oil across 5.5 million acres and a stake in more than 21,000 wells.
“With a rapidly evolving environment, our business has become less competitive,” Chief Executive Officer Bob Dudley said at the company’s investor day today in London. “We therefore intend to run our business in the lower-48 as a separate business to compete more effectively with the independents.”
BP doesn’t intend to sell the unit, Lamar McKay, CEO of the company’s upstream business, said in his presentation today. The world’s largest oil companies have struggled to profit from the boom in production from U.S. shale fields. Royal Dutch Shell Plc said Jan. 30 it will restructure its shale operations in North America after writing down billions of dollars from the value of the assets.
Occidental Petroleum Corp. announced plans last month to spin off its California unit to create more focused businesses, the latest of several spinoffs as U.S. energy companies seek to streamline operations. ConocoPhillips and Marathon Oil Corp. split off their refining units in the past three years and Hess Corp. is in the process of selling and shutting businesses to become an independent exploration and production company.
Independents, unlike integrated oil companies such as BP, don’t own refineries.
Separating the non-Alaskan onshore U.S. business from the rest of BP frees those discoveries from having to compete with discoveries in other parts of the world for financial and personnel resources.
“There is significant value to unlock through improving the cycle time from access through to production and the efficiency of cost management,” Dudley said. “The new business will remain a critical part of BP’s portfolio over the long term.”
Dudley said in an interview last month the company considered “very carefully” whether to split in 2010. BP found such a separation wouldn’t work because some of the units, including North American refining, work better as part of an integrated whole.
BP’s U.S. assets include holdings in Oklahoma’s Woodford, the Fayetteville in Arkansas and the Eagle Ford and Haynesville in Texas, according to its website. The company also has more than 2,000 miles (3,200 kilometers) of pipelines.
The proportion of BP’s sales from the U.S. has been declining since 2009, dropping to 33 percent last year from 35 percent. The stock, which has gained 11 percent in the past year, fell 0.3 percent to 491.5 pence at the close in London.
Shell and Total SA have the largest market values among European oil and gas producers.