Two years after the Deepwater Horizon explosion that resulted in a record-setting 4.9 million barrels of oil spewing out into the Gulf of Mexico, BP has its eyes on the future.
This year, the company is promising investors it’s ready to shift back to expanding its oil production and building financial momentum.
“2012 will be a year of milestone delivery,” BP CEO Bob Dudley exclaims in the company’s most recent annual report released in March. “You can expect high-margin production coming back on stream, major project start-ups and new exploration wells, further progress on our divestment programme.”
Analysts say BP’s recovery since the start of the crisis, has put the oil exploration firm in a good position to deliver on those promises this year.
The stock fell from a high of $60.48 on April 20, 2010 — its market cap at that time stood at $189 billion. The stock bottomed at $27.02 in June of that same year, when its market cap stood at $84.6 billion. But, the stock has since crept back up and now is over $40, with a market cap value of $134.7 billion.
Since Dudley was elevated to the chief executive position during the height of the crisis in July 2010, the firm has sold off more than $20 billion in assets to help meet spill clean-up costs in the Gulf and funding obligations for the $20 billion Gulf Spill Oil Fund, returned to profitability and resumed paying dividends last year — after posting nearly $4 billion in losses in 2010.
“BP for the past six months has definitely been playing more offense,” says Pavel Molchanov, energy analyst at Raymond James. “They raised the dividend, they increased the capital spending program, and most visibly, BP now has five rigs operating in the Gulf of Mexico with a target of eight by the end of the year.”
Molchanov says two years after some had written the company’s obituary, BP has more than proven the skeptics wrong. While its oil and gas production levels remain 10 percent below pre-crisis levels, it is poised to make up a lot of ground. BP has not only resumed deep-water drilling in the Gulf of Mexico, in the last year it also secured more than 50 new drilling licenses in nine countries.
“What that tells us is this company is being treated like any normal multinational oil & gas producer the world over,” he says.
Oppenheimer analyst Fadel Gheit says BP has managed the recovery well, but sustained oil prices above $100 a barrel have also played a big role in the company’s return to profitability 18 months after theDeepwater Horizon explosion.
“When it happened, oil prices were in the 60s,” Gheit says. “Oil prices have averaged $120 for Brent over the last five months, so that helps a lot.” …