September 30, 2019 / 2:57 PM / 8 months ago

Breakingviews - Bob Dudley has made decent lemonade from BP lemons

BP's Chief Executive Bob Dudley speaks to the media after year-end results were announced at the energy company's headquarters in London February 1, 2011.

LONDON (Reuters Breakingviews) - BP handed Bob Dudley lemons, and he has fashioned passable lemonade. The chief executive of the $130 billion UK oil major is drawing up plans to step down next year, Reuters reported on Monday. His legacy will be sweeter than the one he inherited nine years ago.

BP shares have recorded a 56% total return including dividends since Dudley took over in October 2010. That is lower than Royal Dutch Shell’s 70% but slightly higher than Exxon Mobil’s 55%. The company is producing 3.7 million barrels of oil equivalent per day now, not too far below the 4 million cited in its 2009 annual report. And Dudley last year managed an 11.2% return on average capital employed, better than 2009’s 11%.

That’s not bad given his first job on taking over – and for years after - was to sort out the mess created by BP’s oil spill in the Gulf of Mexico in April 2010. As of end 2018, the cumulative hit to BP’s pre-tax profit from the cleanup was $67 billion. Dudley has not only managed to pay this while maintaining BP’s reserves, but also had the headroom last year to spend $10.5 billion buying BHP’s U.S. shale assets.

It helped that BP’s lemonade was accompanied by big helpings of humble pie. Given overall output fell to almost 3 million boe per day by 2014, Dudley was an early and involuntary champion of shareholder value over production volume and had to adopt a no-sacred-cows approach to disposals. His peers ended up following suit after global oil prices collapsed in 2014. By getting out of longstanding operations in Alaska and buying shale assets with short production cycles in the U.S. Permian region, BP’s payback period - the time it takes to cover project investment costs - is shorter than for Shell and Total, according to Citi research.

Granted, the BP boss has - unlike his rival at Shell - held back from incorporating emissions created by the users of his products into those the company thinks it should cut. That is hardly a very green stance. But no one yet knows when the energy transition will bite, and the company’s shorter-duration projects mean it should be easier to switch to greener activities more quickly if need be. Like Dudley’s BP tenure in general, that’s a decent base on which a successor can build.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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