With fallout from last April’s Macondo well blowout a lingering financial and legal concern, BP plc last week cautiously reinstated a shareholder dividend and announced substantial changes to its worldwide portfolio.

The big change for acquisitive BP is a focus on values instead of volumes, BP CEO Bob Dudley told financial analysts during a webcast. “The BP of the future will be a smaller BP. But it will also be a safer BP, a more agile BP and a stronger BP.”

Despite all of the problems it faced following the Gulf of Mexico (GOM) tragedy last April, BP in 2010 produced more oil and natural gas for the 18th consecutive year. It also recorded a 106% reserves replacement ratio, excluding sales, last year. And management sanctioned 15 major global projects.

The London major is treading cautiously as it weaves its way through the court system and its dealings with U.S. regulators, but BP also plans to increase 2011 capital spending year/year by about $2 billion to $20 billion. The spending will not be to buy more assets. Instead it is to improve the quality of the portfolio it has, Dudley said.

“Of course, production numbers matter but we need to see our assets in terms of value and understand how we, as a company, can best create and realize value in those assets,” he told analysts.

Setting production targets, he said, at times clouds a company’s judgment, and some assets might be worth more to another company.

“2011 will be a year of recovery and consolidation as we implement the changes we have identified. It will also be a year in which we have the opportunity to reset the company, adjusting the shape of our business.”

A big change in the United States is the planned sale of its two largest U.S. refinery operations: the Texas City, TX, and Carson, CA, facilities. The refineries account for about one-half of BP’s U.S. refining capacity and their sale would reduce BP’s total global capacity by about 20%. The company is expected to continue to pare its portfolio.

Despite its setbacks, BP’s quarterly earnings jumped almost 30% to $5.57 billion (29 cents/share), compared with $4.30 billion (23 cents) in 4Q2009. Total revenue jumped 14% to almost $84 billion. BP’s “clean replacement costs,” which strip out gains or losses from inventories and nonoperating items, was flat at $4.36 billion versus $4.38 billion in 4Q2009.

One striking result of the Macondo blowout: for the first time since 1992 BP recorded an annual net loss of $3.59 billion. The losses were directly attributed to write-offs related to the well blowout; the write-off rose by $1 billion in the final quarter to total almost $41 billion.

Dudley, who shared a microphone with his executive team for more than two hours on Tuesday, said the company’s main focus going forward is not to be bigger but to be better. With that in mind, business will be more upstream-directed, he said.

Some restructuring will have to wait until U.S. inquiries and lawsuits related to the GOM blowout are resolved. It is a tricky tightrope to walk. BP doesn’t believe it was “grossly negligent” in the Macondo well explosion.

“We believe we have a contractual right to recover costs incurred” with the spill damage, he said. As of Jan. 25, BP has billed $6 billion of the related spill costs to its Macondo joint venture minority partners Anadarko Petroleum Corp. and Mitsui Ltd.

As it waits for U.S. regulators to give the green light to begin drilling offshore again, BP ironically is in the same leaky boat as its peers when it comes to resuming exploration and development — and regaining lost production — in the GOM.

BP sold almost $22 billion in worldwide assets following the Macondo spill last year to help pay for recovery offshore and along the Gulf Coast, but the continued loss of GOM production was evident in the year-end numbers. Production in the final three months of 2010 fell by more than 9% year/year to 3.67 million boe/d.

The production outlook looks no better this year. BP is forecasting that 2011 production will drop year/year by 11.5% to 3.4 million boe/d — and the losses may be higher if it can’t return to the GOM.

BP was and remains the largest GOM producer and one of the largest leaseholders. The oil major reportedly could lose about 80,000 boe/d in the GOM this year if it does not resume drilling in existing fields.

Asked when he thought the U.S. offshore industry would return to pre-Macondo drilling levels, Dudley said “the debate will go on for some time in the United States, which is not unexpected.

“Do we feel that the United States will not get back to work?…I find that highly, highly unlikely given the contribution [of offshore drilling] to the United States…and the contribution of 400,000 jobs. I just would be very surprised following a thorough review.”

For BP the “immediate priority” is to complete the process to embed safety and operational risk management “at the heart” of the company’s approach to all of its activities and throughout all of its operations, said Dudley.

“The heart of the agenda is safety and operational risk,” said BP’s Bob Fryar, executive vice president of Production. “The way to do that in 2011 is to invest more in assets, invest in asset integrity management.”

For shareholders, there was a glimmer of encouragement: the quarterly dividend payment, which had been set at 14 cents/share before the GOM tragedy, will resume beginning with 4Q2010 payments at 7 cents/share. The dividend was canceled for the previous nine months of last year.

One reason BP was able to restore the dividend is the pending joint venture to explore the Arctic with Russia’s state-controlled oil company OAO Rosneft (see NGI, Jan. 17). The transaction is being challenged in court by BP’s other Russian partners TNK-BP, but Dudley expects the legal issues to be resolved amicably through arbitration.

Despite the past year’s events, BP won’t shy away from taking exploration risks, said the CEO.

“We are good at finding oil and gas and we will take advantage of our growing world-class exploration inventory to double exploration investment over the next few years,” he said.

BP plans to start up 32 projects worldwide by 2016, which together are forecast to add 1 million boe/d to total output. Projects to be sanctioned are in the GOM, the North Sea, Angola and Azerbaijan. Longer term, BP also is eyeing growth from several new areas, including Brazil and South China.

BP has leasehold positions in most of North America’s onshore gas and oil basins, and the region will continue to be important, Dudley said. However, “we have a sizable North American gas business…we need to resize for new opportunities.”

BP last week also said it is joining ExxonMobil, Chevron, ConocoPhillips and Royal Dutch Shell plc to develop a rapid-response system to capture and contain oil and natural gas in the event of a deepwater well blowout in the GOM. The original Big Oil sponsors last July launched the Marine Well Containment Co. LLC (MWCC), which, when operational, would be able to mobilize and respond within 24 hours in deepwater depths up to 10,000 feet (see NGI, July 26, 2010).

Among the equipment BP would bring to the MWCC are riser, manifold and containment systems that were developed and used when it responded to the Macondo well blowout. In addition to transferring equipment, BP would provide company information and supporting records, drawings, permits, licenses and other technical information it developed during the spill response.

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