BP has taken a pre-tax charge of US$ 32.2 billion for the Gulf of Mexico oil spill, including the US$ 20 billion escrow compensation fund previously announced.
The company will also tell analysts later today that it plans to sell assets for up to US$ 30 billion over the next 18 months, primarily in the upstream business, and selected on the basis that they are worth more to other companies than to BP. This portfolio high grading will leave the company with a smaller but higher quality exploration and production business.
A prudent approach
Meanwhile BP continues to access new business opportunities, with new agreements in Azerbaijan, Egypt, China and Indonesia announced since the end of the first quarter.
The company said it was taking a prudent approach to managing the balance sheet and its financial liquidity, in order to ensure that BP has the flexibility to meet all of its future financial obligations. As a result it plans to reduce its net debt level down to a range of US$ 10 - 15 billion within the next 18 months, compared to net debt of US$ 23 billion at the end of June. Group capital spending for 2010 and 2011 will be approximately US$ 18 billion a year, in line with previous forecasts.
Strong downstream results
Higher prices for oil and gas made up for slightly lower output and a loss in gas marketing and trading in exploration and production, while refining and marketing reported increased profits as a result of strong performance in the fuels value chains and the lubricants and petrochemicals businesses.
In refining and marketing the company continues to expect an annualised pre-tax performance improvement of over US$ 2 billion, to be achieved over the next two to three years. BP’s underlying second quarter downstream result was the strongest since Q2 2006, when refining margins were more than double current levels, with the US business returning to profitability for the first time in over a year.