BP’s sell-off target soars
0 Comments | Herald, The; Glasgow (UK), Jul 28, 2010 | by MARK WILLIAMSON
BP said it may now sell up to $30bn (pound(s)19bn) of assets as the oil and gas giant looks to bolster its balance sheet to cope with the massive bills expected to result from the disaster in the Gulf of Mexico.
Announcing it had plunged $17bn into the red in the second quarter after recording a $32bn charge in respect of the leak in the Gulf, the embattled firm confirmed it had dramatically increased the size of its planned disposal programme.
While the firm had expected to offload around $10bn of assets last week, outgoing chief executive Tony Hayward said it now planned to sell $25bn to $30bn.
As expected, BP confirmed Hayward will carry the can for the problems in the US by stepping down in October. He will be replaced by an American, Bob Dudley.
The increase in disposals is intended to ensure BP has the funds to cope with all the expected fall out from the explosion on the rig drilling the Macondo well, which caused the deaths of 11 people in April.
This blast in turn triggered a spill which has soiled 836 miles of coast, devastating communities in four states.
BP said it had spent $2.9bn to the end of June trying to stop the leak, cleaning up the spill and paying some of the thousands of compensation claims it expects to receive.
The company fitted a cap on the well on July which has stopped the flow of oil. It hopes to complete drilling a relief well to seal the original well by mid August.
BP has made a $20bn provision in respect of the escrow account which Hayward and BP chairman Carl-Henric Svanberg agreed to set up in discussions with US President Obama.
The fund is expected to meet the costs of litigation settlements and legitimate compensation claims. It will also cover the costs of state and local response efforts and the damage to natural resources.
BP has provided an additional $9.3bn for the expected costs of long term clean up work.
The provision covers the expected cost of fines and penalties under the Clean Water Act.
The company has not made a provision in respect of any other potential fines or legal sanctions.
Directors said BP’s calculations assumed it was not guilty of gross negligence.
Svanberg said the planned disposals would remove any worry about BP’s financial strength
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