LONDON (Reuters) - Oil major BP stands by its investments in Russia, chief executive Bob Dudley said on Tuesday amid calls from U.S. officials to isolate Russia and reduce economic cooperation with Moscow over the Ukrainian crisis.
“In terms of Russia, we absolutely stand by our investment in Russia,” Chief Executive Bob Dudley, a U.S. citizen, told an investor conference on Tuesday.
U.S. Secretary of State John Kerry has condemned Russia’s “act of aggression” in Ukraine and threatened economic sanctions by the United States and allies to isolate Moscow.
The British oil major is the biggest foreign investor in the Russian oil sector through its stake of under 20 percent in the Kremlin’s state oil champion Rosneft.
Russia is responsible for over a quarter of BP’s oil output worldwide and more than a third of its oil and gas reserves.
“We have had good results, Rosneft had good results this year, and so that’s just part of our big portfolio of things,” said Dudley, who has a history of difficult relationships with Russian officials during his time as an oil executive in Moscow.
Dudley had to flee Russia, saying he feared for his security during a 2008 dispute between BP and a group of Russian oligarchs over corporate governance at TNK-BP, where Dudley was chief executive at the time.
TNK-BP was ultimately sold to Rosneft for $55 billion last year, giving BP a stake in Rosneft and putting an end to years or bitter although very profitable relations with the oligarchs.
Analysts praised the deal at the time but said they were concerned about BP’s exposure to Rosneft, run by an ally of President Vladimir Putin - Igor Sechin - one of the architects of Putin’s mass oil sector nationalisation.
“It was only 11 months ago that the merger, or the acquisition by Rosneft, of TNK-BP occurred, it has been a remarkably fast integration of the organisations on the structure, there are a lot of industrial synergies,” said Dudley.
The company sought to reassure investors over the U.S. appeals court decision on Monday to reject a BP bid to block businesses from recovering money over the 2010 Gulf of Mexico oil spill, even if they could not trace their economic losses to the disaster.
“There is plenty of capacity within the existing provision for things that we will come up,” Brian Gilvary, chief financial officer, told the same presentation.
“It’s a different company now, the company can weather things,” Dudley added.
Dudley and his management team focused their marathon presentation on BP’s ongoing work to become “a smaller and simpler company” following accomplished and planned asset divestments of almost $50 billion.
The firm will now focus on growing operating cash flows by 2018 and redistributing surplus cash through buybacks.
“I think we will confuse our investors if we start talking about us considering large M&A. I don’t think that’s what our investors want to hear from us. It’s a really strong plan that we can lay out and work towards, generate the operating cashflow, look forward to distributions to shareholders, have a progressive dividend policy. That’s the path we’re on,” said Dudley.
As part of the ongoing review of assets BP will separate its onshore U.S. oil and gas assets into a new wholly-owned business to improve the competitiveness of its shale gas portfolio there.
A number of big oil companies, including rival European operators Shell and BG, have struggled after making big investments in U.S. shale which have left them exposed to depressed gas prices, dragging on their profits.
But Gilvary said that the U.S. onshore business was not being separated because it was loss-making.
“On an earnings basis, this business today is comfortably in profit, it’s not making a loss today in this quarter. It is deeply strategic to us in the future. That business will be repositioned so that we can really make sure that we can find the value inside that business,” he said.
Reporting by Dmitry Zhdannikov and Sarah Young, editing by Louise Heavens