Three stage losses

BP has developed a business recovery strategy

Yesterday's trading on the London Stock Exchange was marked by new losses in the market value of BP. Shares fell to their lowest levels since December 1996. Since the accident on the Deepwater Horizon platform in the Gulf of Mexico on April 20, the company's capitalization has decreased by a total of 49%. Analysts note that the latest drop in quotations (by 6%) is due, among other things, to the fact that the corporation's chief executive officer, Tony Hayward (pictured left), gave another reason for criticism of himself: this time he refused to participate in the annual World Congress of National Oil Companies in London. However, the significance of the top manager’s speech is significantly reduced given the three-stage crisis strategy adopted by BP, within the framework of which Mr. Hayward may lose his post by the end of this year. Whether Robert Dudley (pictured right) or Ian Conn will take his place is not specified in the action plan.

The change of the head of the company is only the last stage in the recovery of the British company. The primary task, according to the developed strategy, is the payment of multi-billion dollar compensation to those affected by the accident in the Gulf and the subsequent oil spill. Let us remember that, under pressure from the White House, BP assumed all costs of eliminating the damage. However, the problem for the corporation is also that the $20 billion that must be gradually transferred by the company to a special crisis fund (it will be managed by managers appointed by the American administration) is not at all the maximum amount. In order to raise at least part of the funds as part of the first stage of the strategy, BP must raise borrowed funds, which is significantly complicated by constantly downgraded ratings, and sell part of its assets.

The latter circumstance has already caused serious concern in the Russian oil industry and even in government structures. General uncertainty regarding the further development of joint projects was expressed yesterday by the Russian Ambassador to the UK, Yuri Fedotov: “Russia is important for BP, and BP is an important partner for Russia. We want to see how the current situation will affect BP's overall strategy and how it may affect joint projects in Russia. We want to have some guarantee that the company will continue to operate.” The diplomat reminded Western partners that approximately a quarter of all oil produced by the company is provided by Russian projects.

The corporation itself obviously understands the importance of the eastern direction. Thus, during the St. Petersburg International Economic Forum, the head of BP’s business in Russia, David Peattie, announced that the company’s plans do not include the sale of assets in our country. At the same time, according to the corporation’s executive director, Ian Conn, who oversees oil refining and marketing, BP does not intend to part with some strategic assets. “Business in the North Sea is very important for us,” the top manager gave an example. He also noted that the company will not give up its stake in oil refineries and the Aral gas station network.

However, such a decision, apparently, may not affect the small (1.4%) British stake in Rosneft, which was acquired during the IPO for one billion dollars. Its possible sale, however, should not become a serious problem for the Russian side - the package is small and highly liquid. In any case, refusal to participate in the capital of Rosneft will not be able to provide the amount of funds required by BP (within 12 months, $10 billion must be found). Therefore, in the near future the company will abandon unconventional gas fields and small stakes in oil projects in the Gulf of Mexico.

It is worth mentioning that the second point in the company’s recovery plan is the formation of new standards and the development of modern safety technologies in the oil industry.

Analysts attribute yesterday's 6% collapse in BP shares, among other things, to the start of hurricane season in the Gulf of Mexico. Experts are convinced that the bad weather, which meteorologists predict this year could be the worst on record, will significantly complicate the process of dealing with the consequences of the accident on the Deepwater Horizon platform. The first truly powerful hurricane isn't expected to hit the Gulf until next week, but bad weather has already interrupted oil cleanup efforts twice, even though the ships used for the operation are considered less vulnerable to storms than platforms.

Petr GELTISHCHEV