BP raises asset sales target as profit dips less than expected

BP, the operator of the Gulf of Mexico well that caused the worst ever US oil spill last year, said profit declined less than expected as it increased an asset sales target 50% to $45 billion (€32.3bn).

Third-quarter earnings adjusted for one-time items and changes in inventory were $5.3bn, down from $5.5bn a year earlier. The average estimate of 12 analysts surveyed by Bloomberg was for profit of $5bn on that basis. Oil and gas production fell 12% from a year earlier to 3.3 million barrels of oil equivalent a day.

Chief executive Bob Dudley plans to increase the company’s cash flow by 50% by 2014 by focusing on the most profitable production projects. The higher asset sales target includes the disposal of half of its US refining capacity.

BP has shed more than $25bn in assets to bolster its balance sheet after the Macondo well accident. The company has taken a charge of more than $40bn for the disaster, a sum that may be reduced if other partners in the runaway well contribute to the costs. This month, BP settled with Anadarko Petroleum for $4bn.

“We’ll have a smaller footprint, but one that plays to our strengths,” Mr Dudley said in a Bloomberg Television interview. “Between now and 2016, we should add one million barrels a day of new production and the margins will be double our current ones.”

Mr Dudley plans to double the company’s exploration budget over the next few years. Last week, BP won regulatory approval for its first drilling plans in the Gulf, home of its most profitable fields, since the spill.

BP has plans to get all five of its Gulf of Mexico rigs working by the end of the year. Three vessels have already received permission to carry out plug and abandonment work, the company said yesterday. Dudley said the company may get up to eight rigs working in the Gulf next year, more than the company has ever had in the region.

BP has yet to gain approval from the US Bureau of Ocean Energy Management to drill new wells, and will still need permission for each individual one in the plans for the Kaskida field approved last Friday.

Gulf of Mexico production is likely to stagnate at about 250,000 barrels a day through next year, Mr Dudley said.

BP Group, Britain’s third-largest oil company, said earnings rose in the third quarter as energy prices increased. Net income climbed to $1.06bn in the period from $849 million a year earlier.

BP is the first of the world’s biggest oil producers to post results. ExxonMobil and Royal Dutch Shell will report earnings tomorrow.