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Financial Times: BP chief denies Shell rumours

By Ed Crooks, Energy Editor
Published: July 25 2007 03:00 | Last updated: July 25 2007 03:00

Tony Hayward, BP’s new chief executive, has poured scorn on the idea of a merger with rival Royal Dutch Shell, saying the two companies had not been discussing a deal, and it would in any case do nothing to resolve the problems BP faced.

There was “absolutely nosubstance to any speculation” that a merger was under consideration, Mr Hayward said. He was speaking as BP unveiled what he described as “disappointing” profits for the first half of the year.

Underlying replacement cost profit for the second quarter was down 13 per cent at $5.35bn (£2.6bn), although it was slightly ahead of the average of analysts’ expectations.

Rumours of a tie-up between BP and Shell, Europe’s two biggest oil companies, have resurfaced recently. A deal, which would then have amounted to a takeover by BP, was considered by Lord Browne, Mr Hayward’s predecessor, in 2005.

Mr Hayward yesterday strongly rejected the idea: “The issues we face are operational, not strategic: we need to focus on restoring our operational performance.”

BP’s results were hit by problems at its US refineries, including Texas City, which was hit by a fatal explosion in 2005, and Whiting, which suffered a fire this year.

Between them, the two refineries have a capacity of about 830,000 barrels a day, but are running at only about 500,000 b/d. They are not expected to return to full operation until next year.

The problems have come at a time of bumper profitability in the industry, from which BP’s competitors are benefiting.

BP has also been set back by delays to large projects, including the Thunder Horse platform in the Gulf of Mexico.

Mr Hayward said: “BP’s current operational performance is not good enough. This has impacted our financial performance. I am determined tofix this.”

Mr Hayward set out a programme of changes designed to improve operations, including new management systems and the recruitment of moreengineers.

About 100 people are also being redeployed from head office to front-line operations.

The dividend for the half year has been raised 10 per cent in US dollar terms. However, BP has curbed its share buy-backs, spending only $4.3bn on the net repurchase of shares.

Copyright The Financial Times Limited 2007

 

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