BP plc CEO Bob Dudley last week said the beleaguered oil major will become a “simpler,” more oily company over the next few years.

He and his management team shared the company’s near-term vision during an investor strategy update in London. The big priorities are to increase upstream investments to capitalize on “higher margin” opportunities. The Gulf of Mexico (GOM) is to remain one of the top four businesses, even though BP has been temporarily suspended from new contracts with the U.S. government (see NGI, Dec. 3).

Dudley didn’t spend much time discussing the temporary suspension in the United States. He said BP is cooperating with federal officials on the “development of an agreement” about when to expect “the lifting of the settlement.” Ongoing U.S. projects haven’t stopped, he noted. In fact, the GOM remains one of the company’s busiest operational areas. But the management team acknowledged that BP has been facing an uphill battle to stabilize global operations since the Macondo well blowout in the GOM two years ago.

There’s more clarity today after the company reached a settlement with the U.S. Department of Justice last month to pay more than $4.5 billion in fines to settle criminal claims, Dudley said (see NGI, Nov. 19). A top-to-bottom reorganization was completed, and the company plans to sell $65 billion of its assets, about half of its total market value.

The focus today is in “resolving significant uncertainties” and “focusing hard on the rest of BP,” said Dudley. “We have sold 50% of our upstream installations, one third of our wells and half of our pipelines. Yet, we have only lost 9% of our production and 10% of our reserves. That makes us a simpler company.”

Once the top natural gas producer in North America — and still the top North American gas marketer (see related story) — BP now will be training its sights on oil.

“There are different strategies emerging,” Dudley said of its rival producers. Royal Dutch Shell plc and ExxonMobil Corp., for instance, are focusing a lot of resources to build big gas portfolios worldwide. BP doesn’t have that option at the moment, he said. “We have a bias to oil” for the near-term. “We will have regional gas projects but we expect oil to offer superior returns through the decade.”

BP has “underlying growth” even with all of its repositioning, said the CEO. “We have more projects and opportunities than we will be able to do unless we maintain capital discipline. We have to pace the opportunities we have to ensure we have free cash flow…We could plow back cash flow and over-invest…and not keep pace. We have a choice…With inventory coming through we have to be able to make choices. A year ago we said we would not hesitate to divest assets. All of the options are open to us in terms of capital discipline.”

Capital spending through 2014 is set to increase to between $24 billion and $27 billion, from $22 billion in 2012 and $19.1 billion in 2011. Upstream spending is to take about 80% of total capital expenditures in 2014 from about 70% in 2011.

“This would be financed by higher cash flow from operations and asset sales of between $2 billion and $3 billion a year,” said Dudley. A target also was reiterated to increase operating cash flow in 2014 by 50% from 2011.

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