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Oct 25 2011

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UPDATE: BP Shares Rise After Firm Promises Better Returns

   By Alexis Flynn 
   Of DOW JONES NEWSWIRES 

A company press release made the case the company has turned the corner, arguing that 2011 progress had succeeded in "creating a stronger and safer BP ." Still, some analysts said they wanted more evidence of progress given recent disappointments.

BP , which is still dealing with the fallout of last year's major oil spill in the Gulf of Mexico, has been under pressure from shareholders to deliver a clear strategic direction and help it catch up with its sector peers. Since the incident last year, BP 's stock has lost more than a third of its value.

"We have now reached a definite turning point," BP Chief Executive Bob Dudley said.

The company also said Chief Financial Officer Byron Grote would step down from his position in January, to be replaced by his deputy Brian Gilvary. Grote, who will assume another executive vice president role and retain a seat on the board, has been BP CFO for nine years.

With analysts and investors prepared for the production fall -- which was in line with expectations --attention turned to how the company plans to accelerate its recovery and improve shareholder returns.

BP said it plans to increase the size and scope of an asset sale program to help cover the cost of the oil spill from $30 billion of divestments to $45 billion. BP said the additional money raised from the sales would be invested "in quality, higher-growth opportunities, mainly in exploration and production, while divesting low-returning assets." Some of the increase to the new $45 billion figure comes from the inclusion of previously announced U.S. refinery sales.

The company said its clean replacement cost profit, a keenly watched figure that strips out gains or losses from inventories and other non-operating items, fell 3.6% for the period to $5.33 billion, compared with $5.53 billion for the third quarter of 2010.

This was above expectations of $5.06 billion in a Dow Jones Newswires poll of 13 analysts.

Total production for the period was 3,319 million barrels of oil equivalent a day, a 12% decline from last year. Analysts had anticipated 3,315 million.

Operating cash flow improved markedly to $6.89 billion from a loss of $652 million last year. BP now expects cash flow to grow by around 50% by 2014, assuming a $100 per barrel oil price environment in 2014. The company said it would evaluate its plans for 2012 shareholder distributions in February "adjusting them in line with the improving circumstances of the firm," as Dudley put it.

Analyst Peter Hutton from Royal Bank of Canada said while the numbers were encouraging, talk of a turnaround was "perhaps premature" until new drilling permits in the Gulf of Mexico are received.

Hutton pointed out that BP has sometimes made hasty announcements-- such as its mooted tie-up with OAO Rosneft (ROSN.RS) in January that subsequently collapsed following objections from its Russian joint venture partners -- so "the market may want to see proof" that things are really improving.

-By Alexis Flynn, Dow Jones Newswires; +44 (0)20 7842 9317; alexis.flynn@dowjones.com

(END) Dow Jones Newswires

25-10-11 0855GMT