North Sea is not competitive, says BP boss days after exit
The boss of BP has branded the North Sea as not competitive just days after putting the company’s assets in the basin up for sale.
Meg O’Neill, who took over as chief executive in April said she had spoken with prime minister Andy Burnham as she justified BP’s decision to exit the North Sea.
Speaking to CNBC, O’Neill said: “When we look at how it fits into our portfolio today, it just doesn’t compete for capital.”
The decision leaves the British energy giant without any petrochemical production in its home market for the first time in decades. O’Neill’s comments add to the growing pressure on new prime minister Andy Burnham to scrap the oil and gas windfall tax.
Selling US business
O’Neill was speaking as the oil giant revealed its latest results, where it confirmed it will also offload its US biogas business as part of the firm’s shift to focus back on core oil and gas products.
The London-listed oil giant has previously told investors it planned to market assets across its operating regions as part of a restructuring overseen by O’Neill.
BP acquired Archaea for $4.1bn in 2022 but the business has since faced financial under performance and slower than expected growth, forcing the FTSE 100 giant to reassess the asset’s worth.
O’Neill said the firm must simplify its portfolio “based on value, not sentiment, nor history” and instead focus on assets which “deliver competitive returns and long-term value”.
She has previously announced plans for a major overhaul of the group’s energy channels, splitting it into two divisions, dubbed upstream and downstream, and focusing solely on profitable assets.
The push has also seen the group sell its Gelsenkirchen refinery and retail business in Austria.
O’Neill said: “We are not making the most of our potential. Our performance over the past few years has not met our own expectations, let alone those of our shareholders.
“We have not delivered consistently; we have written off too much value; and our costs and liabilities are not resilient enough in a low price environment.”
Shares rose 1.2 per cent in early trading to 559.1p per share. The stock is up 27.6 per cent since the start of the year.
Middle East conflict spikes profits
Profits spiked in the second quarter as the group continued to capitalise on volatile oil prices caused by the conflict in the Middle East.
BP reported a surge in profits to $5.7bn (£4.2bn), a $2.5bn increase from the prior period.
This surpassed analyst expectations of $5.1bn.
The firm’s gas and low carbon energy arm reported profits of $1.6bn, up from $1.1bn the prior quarter.
Oil production and operation saw profit climb to $3.4bn from $1.7bn.
Mark Crouch, market analyst at Etoro, said: “Having retreated from its previous push into renewables, BP is accelerating asset sales, simplifying the business and directing more capital towards higher-return oil and gas operations.
“If tensions across the Middle East persist or escalate further, energy prices could remain elevated, providing an additional tailwind for the sector. The key question for investors is whether BP can use this favourable backdrop to create lasting shareholder value long after today’s geopolitical uncertainty eventually fades.”
Disruption ahead
The firm anticipates production in the third quarter to range from 2,100 to 2,250 thousand barrels of oil equivalent per day (mboe/d), compared with the second quarter 2,201 mboe/d.
This has caused the group to drop its upstream production expectations for the year to 2,180 to 2,270 mboe/d, compared to last year’s 2,312 mboe/d.
BP pinned its outlook on the “continued disruption in the Middle East” and the likelihood of potential “weather events in the Gulf of America”.
The group expects income taxes paid in the quarter to be roughly $1bn higher, “mainly due to timing effects”.
O’Neill said: “We need to take a clear look at ourselves: assessing what needs to change, stopping what holds us back and building strength where it matters. We have to get fit to grow.”