BP CFO Prefers to Buy Fields Over Rival Companies (Update1)
February 05, 2010, 11:01 AM EST(Adds 2009 debt issuance in fourth paragraph.)
By Marianne Stigset and Brian Swint
Feb. 5 (Bloomberg) -- BP Plc is likely to look at oil and gas fields when considering acquisitions rather than rival companies, Chief Financial Officer Byron Grote said.
“If you look at the asset acquisitions that we’ve made in recent times they’ve tended to reinforce gaps that we had in our upstream portfolio, and I want to underscore assets, not companies,” Grote said in an interview in Oslo yesterday. “We have the balance sheet capability to make inorganic moves if we see fit.”
BP is already the biggest oil and gas producer in the U.S. Chief Executive Officer Tony Hayward said last month the company would like to acquire more assets in Brazil, while TNK-BP, its Russian subsidiary, entered a joint venture for Venezuela. BP had $8.3 billion in cash and cash equivalents on its balance sheet at the end of last year.
The CFO said London-based BP would not be seeking to raise as much debt through the bonds markets in 2010 as it did last year. The company issued about $11 billion of bonds last year, press office spokeswoman Sheila Williams said.
“We were very active in the bond markets last year, we exited the year with a lot of cash, so our activity would certainly be considerably less than it was in 2009,” Grote said.
TNK-BP, BP’s Russian venture, may borrow “a little bit more” this year to help refinance $1.5 billion of debt due, the company’s Chief Financial Officer Jonathan Muir said in an interview yesterday. The company sold $1 billion of dollar notes last week.
New Projects
Exxon Mobil Corp., the largest U.S. company, agreed in December to acquire XTO Energy Inc. for its gas reserves and expertise in tapping rock formations. At $28 billion, it’s the company’s largest acquisition since Mobil in 1999.
BP’s output rose 4 percent to 3.998 million barrels of oil equivalent a day last year as it ramped up operations in the Gulf of Mexico. The company plans to start 10 major oil and gas projects this year and next to boost production, and said it will maintain spending on investment projects at $20 billion this year.
BP’s adjusted loss from businesses outside of oil and gas production, refining and marketing widened to $2.3 billion last year, from $1.2 billion in 2008, partly due to weaker margins for its shipping and solar business, according to results earlier this week.
BP expects to lose about $1.6 billion this year in the division including solar energy and shipping, averaging around $400 million a quarter. The company is not considering divesting its assets in the division, Grote said, adding that the company had improved operations in the unit as it was reducing its loss from $1.8 billion in 2009 by cutting corporate costs.
‘Very Weak’
“Shipping rates are still very weak and the price of photovoltaic panels, or modules, is still very weak and we don’t see that improving in the course of 2010,” Grote said. “We’re investing over $1 billion a year in various alternative energy activities. We’re investing in them not for today but because we believe in those businesses for the longer term.”
Hayward on Feb. 2 said his company will push the oil and gas service industry “very hard” to cut costs, while Chief Executive Officer Andrew Gould of Schlumberger Ltd., the world’s largest oilfield-services provider, yesterday said negotiations with producers to cut prices were over.
“It should be an everyday activity, trying to find out ways to more efficiently acquire goods and services from third parties,” Grote said. “But there are occasions when this can be done to create win-win situations by approaching it in a more of a joined up partnership way, you can find ways to reduce overall costs without reducing the margins of service providers.”
Grote said costs in some areas of the service industry were continuing to go down, while others had flattened and some were gaining.
--Editors: Stephen Cunningham, Jonas Bergman.
To contact the reporters on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net Brian Swint in London at bswint@bloomberg.net.
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.
