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Daily Telegraph: BP shifts focus to safety not big deals

EXTRACT: There is speculation Moscow will seek greater control over TNK-BP’s assets in a repeat of the problems that hit Royal Dutch Shell’s Sakhalin 2 project.

By Russell Hotten, Industry Editor
Last Updated: 12:06am GMT 07/02/2007

BP chief executive-designate Tony Hayward has signalled that he plans a change of pace for the oil major as he tries to get a grip on safety concerns and a slowdown in production.

Mr Hayward said the speed of growth in recent years had put the company under strain, and BP will spend more time looking to exploit its “embedded value” than in pursuing mergers and acquisitions.
  
BP CEO-designate Tony Hayward (right) shares the spotlight with Lord Browne, who leaves the post in July
 
Sitting next to Lord Browne, the chief executive who leaves at the end of July, Mr Hayward indicated a break with the past when he told a press conference: “Trying to continue at the pace that we were doing two to three years ago is unsafe and insufficient.”

The company was hampered by severe labour shortages which had in particular contributed to delays in the start-up of BP’s Thunder Horse platform. “The supply chain is being stretched to breaking point,” Mr Hayward said. “With the benefit of hindsight we probably pushed the technology envelope [at Thunder Horse] too far.”

The incoming chief executive did not discount BP engaging in takeover activity under his tenure but indicated big deals were not on his agenda. “M&A is simply a tool to deliver a strategy,” he said. He said his immediate attention would be a “laser-like focus on safe and reliable operations. We have embedded value [in BP] and could realise a lot more of it”.

The comments appear to rule out for the foreseeable future a merger with Royal Dutch Shell, a subject neither Lord Browne nor Mr Hayward would talk about yesterday.

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Lord Browne built up BP into the world’s third largest oil company by market value with a string of mergers and acquisitions, including the takeover of Amoco and Arco, and a ground-breaking joint venture in Russia.

Mr Hayward was speaking as BP unveiled disappointing profit figures for the last three months of 2006.

And in a surprise move the company also reduced forecasts for production growth. The cut in estimates was due in part to BP’s increased “focus on safety and operational integrity”, said Lord Browne. The company would in certain cases “deliberately slow the pace of our activity in order to improve safety and efficiency”.

From now on BP would use more conservative estimates when assessing what it would receive from production sharing contracts, he said.

Analysts said it looked like BP was attempting a fresh start. “The market will now hope that the departure of Lord Browne will enable a line to be drawn in the sand, so that the company can move forward,” said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.

And Jonathan Wright, oil analyst at Citigroup, said it was possible BP was attempting to “kitchen sink expectations ahead of the new chief executive taking the reins”. Lord Browne said there were no plans for BP to sell any of its 50pc stake in TNK-BP, the Russian venture. There is speculation Moscow will seek greater control over TNK-BP’s assets in a repeat of the problems that hit Royal Dutch Shell’s Sakhalin 2 project.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/02/07/cnbp07.xml

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