To meet its $30 billion divestiture target by the end of 2011 BP plc will continue to pare its assets with sales in the United States, Canada and the United Kingdom, the producer said in its annual report, which was released on Thursday.
At the end of 2010 the London-based producer had agreed to sell nearly $22 billion in assets toward the $30 billion target, according to Group CEO Bob Dudley. The asset sales are in part to help pay for the Macondo well blowout in the Gulf of Mexico (GOM) last April.
Assets still on the sales block include BP's stake in the Tuscaloosa fields in Louisiana, the Wattenberg gas system in Colorado, and the natural gas liquids business in Canada (see Daily GPI, Dec. 27, 2010; July 28, 2010). In addition BP is marketing onshore oil and gas fields in the North Sea, including associated pipelines.
"We have also cut back on discretionary capital spending and secured additional credit lines," Dudley said in a videotaped message to shareholders.
The sale agreements led to a year-end 2010 replacement cost loss of $4.9 billion, Dudley noted.
"I expect 2011 to be a year of consolidation for BP, as we focus on completing our divestment program, meeting our commitments in the U.S. and bringing new rigor to the way we manage risk," he said. "There will also be an increasing emphasis on value over volume, as we sharpen our strategy and reshape the company for growth."
BP executives involved in the Macondo well blowout in the GOM last April will not receive bonuses for 2010, the company revealed in the annual report.
Even though he was not involved in the day-to-day decisions of the GOM unit before the blowout, Dudley agreed to forgo his bonus. Former Group CEO Tony Hayward and former exploration chief Andy Inglis lost their bonus payments.
"In the judgment of the committee and the group chief executive this overrode the normal metrics for bonus outcomes," Remuneration Committee Chair DeAnne Julius said in the annual report.
Hayward, who had led BP after Lord John Browne stepped down in 2007, in 2009 received a bonus on top of his compensation of about $3.25 million.
"Remuneration decisions for 2010 were dominated by the scale and impact of the accident in the Gulf of Mexico," said Julius. "The remuneration committee shared the group chief executive's view that no bonuses should be paid on group-level results."
Dudley was the only executive director to receive a salary increase, which lifted his base earnings to $1.18 million from $750,000 following his promotion to CEO in October. He will receive no pay increase this year but is eligible for share payments based on the company's performance in the next two years.
Hayward continues to be paid by BP as a nonexecutive as part of the management team that leads the company's joint venture with Russia's TNK-BP.
Chairman Carl-Henric Svanberg described 2010 as a "profoundly painful and testing year," referring to the tragic accident on the Deepwater Horizon rig that claimed the lives of 11 men and devastated the Gulf Coast region.
"The accident should never have happened," Svanberg said in a message to shareholders. "We are shocked and saddened that it did...Our response has been unprecedented in scale, and we are determined to live up to our commitments in the Gulf. We will also do everything necessary to ensure BP is a company that can be trusted by shareholders and communities around the world."
BP still faces "substantial challenges," but "through its refocused strategy, the company is working to become more agile and more competitive, with strong emphasis on realizing value rather than building volume and scale," said Svanberg.
"2010 stands as an inflexion point for BP and our industry, and it is right that we should help lead the development of better ways to operate in deep water," said Dudley. "Good risk identification and management is integral to becoming safer, and we are working with governments, service contractors and industry peers to take risk management and equipment design to the next level."
Dudley said he has been asked, "Does BP 'get it?' Residents of the Gulf, our employees and investors, governments, industry partners and people around the world all want to know whether we understand that a return to business-as-usual is not an option. We may not have communicated it enough at times, but yes, we get it.
"Our fundamental purpose is to create value for shareholders, but we also see ourselves as part of society, not apart from it," said the CEO. "Put simply, our role is to find and turn energy resources into financial returns, but by doing that in the right way we can help create a prosperous and sustainable future for everyone."
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