The collapse of BP’s latest asset sale has thrown the spotlight of investor pressure back on CEO Bob Dudley, as the company continues to lag behind its supermajor rivals in share performance.
Dudley, who declared that BP had reached a “turning point” after the Macondo disaster on the release of the firm’s Q3 results last month, may have to re-think its plan to raise its dividend after the $7 billion sale of its Argentinean unit and followed a failed $16 billion share swap agreement with Rosneft for deepwater arctic exploration in Russia.
Fitch, a ratings agency, said: “We believe that if the company’s cash position were to become more constrained in the short term, the company’s most likely first response would be to postpone any increase in its dividend payments.”
BP had hoped to sell its Pan American Energy unit to Bridas, which is 50% owned by China’s CNOOC, as part of a divestment program aimed at footing the bill for the Macondo disaster, which it is estimated will cost the firm $40 billion. Only last month the company announced it was stepping up its divestment program from $30 billion to $45 billion, having confirmed that $26 billion have been raised so far.
The reason for the collapsed sale is unclear, with BP leaving little clue save for “legal reasons” and Bridas citing regulatory and legal concerns and “the way BP handled the transaction.”
CNOOC’s decision to withdraw came less than two weeks after Argentina’s President Cristina Fernandez de Kirchner ordered energy and mining companies to repatriate future export revenue. The announcement, made immediately after her re-election on 23 October, is seen as a bid to slow accelerating capital flight from the Argentinean economy.
A CNOOC official cited by Reuters said regulatory concerns were not to blame and the deal had fallen down on commercial terms, and Argentine regulators have denied issuing any impediment to the deal.
Both sides come away from the failed deal with reputational damage, as deals between Argentina and China are getting done elsewhere.
Sinopec, another state-backed Chinese firm whose competition with others such as CNOOC is tightly controlled and minimized by Beijing, has agreed to buy Occidental’s Argentina assets for $2.5bn.
BP has made great strides in settling the legal liabilities arising from the Macondo blowout and Gulf of Mexico spill, which have help maintain BP’s share price despite disappointments from the deal-making side of the business. But if Dudley cannot progress its divestment program soon, he may have row back on his bold stance taken on the company’s prospects just a month ago.
“BP does not currently plan to divest additional assets to offset proceeds which would have been received from” the Pan American sale, BP confirmed in a statement.
