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Petroleum industry

BP Disappoints Market with Second-Quarter Profits as CEO Dudley Leaves Door Open for Company Break-Up

Strategic Insights

— 1 min read

BP's second-quarter profits of $5.3bn (pounds sterling 3.2bn) were not enough to revive the company's fortunes, which have been stagnant in the wake of the Gulf of Mexico oil spill and a failed pounds sterling 10bn deal in Russia. The oil major's share price slipped 2.5% to 463.25p as production fell 11%, with only half of the decline attributed to disposals. CEO Bob Dudley is under pressure to revitalize the company, and some analysts have suggested that BP should split off its refining and marketing divisions to focus on exploration and production, which generates more profits.

Key Takeaways:

  • BP's second-quarter profits of $5.3bn were a remarkable turnaround from the loss of more than $16bn related to the oil spill in the same quarter last year.
  • The company's share price slipped 2.5% to 463.25p, despite high oil prices averaging above $106 per barrel in the quarter.
  • Production fell 11%, with only half of the decline attributed to disposals, and about 7% due to maintenance in Angola and the North Sea, as well as ongoing disruption to drilling in the Gulf of Mexico.
  • CEO Bob Dudley left the door open for a possible break-up of the company, stating that they "review their portfolio and consider all options" and are "not ruling it in or out".
  • BP is still in dispute with its Russian partners in the joint venture TNK-BP, where profits doubled to $2.1bn during the quarter.
  • The company failed to complete a pounds sterling 10bn deal with Russia's state oil giant Rosneft earlier this year, which would have been transformational.
  • Analysts such as Alejandro Demichelis of Bank of America Merrill Lynch have suggested that management is willing to think about strategic alternatives, including a break-up.

Statistics:

  • BP's second-quarter profits: $5.3bn (pounds sterling 3.2bn)
  • Share price: slipped 2.5% to 463.25p
  • Production decline: 11%
  • Maintenance-related decline: 7%
  • High oil prices: averaged above $106 per barrel in the quarter
  • Loss related to oil spill in the same quarter last year: more than $16bn
  • Budgeted costs for the oil spill: $41bn
  • Dispute with Russian partners in TNK-BP: ongoing arbitration proceedings

Sources:

  • Bloomberg News article, "BP’s Dudley Leaves Door Open to Break-Up as Second-Quarter Profit Disappoints", cited in the Financial Times
  • BP's second-quarter results, released on July 28, 2011

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