By BEN LEFEBVRE: February 5, 2013
HOUSTON–BP BP.LN +1.44% PLC ceded its spot as the biggest crude-oil producer in U.S. Gulf of Mexico federal waters to rival Royal Dutch Shell RDSB.LN +0.31% PLC as BP’s 2012 output declined due to major maintenance work and asset sales.
The U.K. company had been the Gulf’s most prolific oil producer since 2008, the year in which it took the crown from Shell, according to U.S. government data.
The shift underscores the lingering fallout from the 2010 Deepwater Horizon disaster, which led to a deep restructuring of the company and prompted it to sell billions of dollars in assets.
In April 2010, a well blowout destroyed a rig drilling for BP, killing 11 and unleashing the worst U.S. marine oil spill ever. The catastrophe led to the stoppage of most Gulf oil and gas activity for about a year as the U.S. government beefed up offshore operating rules.
BP produced about 185,000 barrels of oil a day in the Gulf’s deep waters in 2012, down nearly a third from the year before, according to recent data from the Bureau of Ocean Energy Management. Shell produced about 191,000 barrels of crude a day, a 4% drop.
“We are extremely proud of this oil-production milestone in our journey operating deepwater assets in the U.S. Gulf of Mexico,” a Shell spokeswoman said in an email.
Since 2010, BP has sold assets worth $38 billion, including fields in the Gulf valued at $5.6 billion, to help pay for the cost of the Deepwater Horizon spill.
BP divested itself of about 46,000 barrels a day of its production in 2012 in the U.S. Gulf, so output levels are unlikely to see a big boost this year, Chief Executive Bob Dudley said in a conference call Tuesday. He added, however, that he expected more production to come online in 2014 and 2015 as the company catches up with its drilling program.
“We have, like many companies, been slowed down gradually by the moratorium,” Mr. Dudley said.
The production drop was also due in part to major maintenance work BP undertook in the early part of 2012, including the replacement of seabed facilities at the large Atlantis field, which was shut down for the entire second quarter. In a second-quarter earnings call, Chief Financial Officer Brian Gilvary said the company lost an average of 86,000 barrels of oil equivalent a day of production during that quarter. Mr. Dudley called the maintenance program “an investment in building a safe and reliable platform for the future” during Tuesday’s fourth-quarter earnings call.
BP has long been one of the most successful explorers in the deep-water Gulf, a region that accounts for just over half of its U.S. oil production. Even as the company has jettisoned significant assets all over the world, the region remains one of its main global targets: it will invest $4 billion a year over the next decade into its U.S. Gulf operations and maintain its position as the largest investor and leaseholder in the region, BP spokesman Brett Clanton said.
Most large producers in the Gulf saw a production decline in their older wells because of a slowdown in investment after the roughly six-month suspension in new drilling activity after the Macondo accident, said Kevin Book, managing director at energy consulting firm Clearview Energy LLC.
Still, BP is likely to regain the top rung for U.S. Gulf production in the next few years, said Fadel Gheit, senior energy analyst at Oppenheimer & Co.
“BP is the largest there in terms of acres, activity and investment,” Mr. Gheit said. “Once they get back on their feet, production will start picking up steam.”
—Selina Williams, James Herron and Angel Gonzalez contributed to this article.
Write to Ben Lefebvre at [email protected]