BP has put its North Sea oil and gas business up for sale, and its US biogas unit Archaea is also on the block, less than four years after buying it for $4bn (£2.98bn). CEO Meg O'Neill said the company will ignore 'sentiment' and 'history' in pruning its portfolio, and that the North Sea 'just doesn't compete' for capital.
Strategic Shift Under New Leadership
O'Neill is rapidly clearing the decks after years of strategic muddle. The sale of solar unit Lightsource is close, and major refinery in Gelsenkirchen, Germany, and Austrian fuel stations have already been sold. The Castrol lubricants business was also being sold before O'Neill arrived.
BP expects to reach its target of net debt below $18bn by the end of the year, 12 months ahead of schedule, boosted by the surge in oil and gas profits. BP's profits more than doubled to $5.73bn in the three months to the end of June.
Profit Boom and Investor Expectations
BP sold its oil at an average of $94 a barrel in the second quarter, up from $67 in the first. Campaign groups have expressed outrage, but City analysts are unsurprised by the huge profits.
Investors are now asking when BP will restart share buy-backs, which were cancelled in February. O'Neill dodged the question on Tuesday, but shareholders will expect an answer soon.
Advice to New PM on North Sea
O'Neill advised Andy Burnham, the new prime minister, that the UK gets 75% of its energy from fossil fuels, and that the first barrel of oil and molecule of natural gas should come from the UK North Sea to generate jobs and tax revenue.
While O'Neill won't reverse BP's exit, her comments imply that boosting domestic supplies would require a rethink of the windfall tax on energy profits to incentivize investment. Burnham has said he is 'looking at' the levy, a key decision for October's budget.
