Analysis: Post-spill, Gulf of Mexico key to BP’s fortunes
By Chris Baltimore
(Reuters) – BP Plc is headquartered at St. James’s Square in London, but the energy company’s fate lies in the deep waters of the Gulf of Mexico.
Though the worst U.S. offshore oil spill has ravaged BP’s reputation and its stock price, BP will likely remain a top operator in the Gulf, a region which is key to future U.S. and global energy supplies.
More than six months after BP’s Macondo well ruptured and caused more than 4 million barrels of oil to spew into the sea, BP’s attention turns to scouring the oil-soaked shoreline and salvaging an image that has taken a beating from furious Gulf Coast residents and politicians.
BP faces a barrage of civil and likely criminal prosecution from the U.S. government and hundreds of injured rig workers, but is unlikely to abandon the Gulf.
That’s because the U.S. government needs deep-pocketed energy companies like BP that can foot the soaring cost of drilling there, and BP needs access to the region’s reserves, which are some of the most profitable in its portfolio.
BP’s new chief executive, American-born Bob Dudley, must defend his company’s turf in North America, home to nearly half of its global assets and its biggest earnings driver.
“I can promise you that I did not become chief executive of BP in order to walk away from the U.S.,” Dudley said on October 25 in a defiant speech which criticized the media and industry rivals of stoking fears. “BP will not be quitting America.”
In its quarterly earnings statement on November 2, BP raised its estimated cleanup costs by $7.7 billion to $40 billion.
“The path to rehabilitation post Macondo and Bob Dudley’s new strategic direction are the key to performance rather than Q3 earnings,” analysts at Citigroup Global Markets said.
Institutional investors say BP can shoulder cleanup costs and the added expense of new offshore regulations. But BP must convince sometimes skeptical officials that disasters like Macondo are in the past.
“Bob Dudley’s first priority is reestablishing BP’s credibility with the U.S. government and with various regulators so that BP can continue to operate in the Gulf of Mexico,” said Will Riley, co-manager of the Guinness Global Energy Fund, which includes BP.
In the darkest days of the spill, U.S. politicians and even President Barack Obama referred to BP as “British Petroleum,” the now-defunct name the company carried from the 1950s until it merged with U.S.-based Amoco in 1998 to become BP Amoco, and then BP Plc in 2001.
But BP is as American as apple pie — or almost.
After striking a major find in Alaska’s Prudhoe Bay field in 1969, BP grew its market share to be a top producer in the United States, for years the biggest global energy user until China supplanted it this year. Read more..
source: Analysis: Post-spill, Gulf of Mexico key to BP’s fortunes