Analysts expect BP to report $5bn profits for the final quarter in 2010, on Tuesday.
Bob Dudley, BP’s chief executive, will scrap the company’s production targets when he lays out his vision this week for a smaller, more exploration-focused company after last April’s Gulf of Mexico disaster.
Analysts expect that BP will pump about 3.6m barrels of oil and gas a day this year, a tenth less than in 2009, when it overtook US group Exxon Mobil to produce more than any other non-state-controlled company.
Sources close to the Environmental Protection Agency (EPA) also told the Observer that the US government is likely to agree to reduce its estimate of the size of the gulf spill, which would cut BP fines.
Water samples from the gulf by US government scientists investigating the environmental damage caused by the spill are also understood to be showing a stronger than expected recovery in fish stocks, further limiting the damages payable by BP. Shell fish stocks remain severely affected however.
In the last year, BP sold assets worth $20bn (£17bn), many of them mature oil and gas fields, partly to raise cash to pay for spill-related costs. The company had also banked on new fields in the gulf to help it achieve its target, set out weeks before the spill, of increasing production by 1%–2% from 4 million barrels per day until 2015. But new regulations will increase the cost and time to develop them.
Analysts at Liberum Capital expect limited production growth after 2012, but more in the longer term as BP focuses on big new finds and unconventional gas.
Peter Hitchens, an analyst from stockbroker Panmure Gordon, said that Dudley could outline plans to eventually increase production by 3% each year, but starting from a lower base. Dudley is also expected to reassure investors that the $39bn provision it has made for spill-related costs will be more than enough. They are forecasting that BP will report a $5bn profit in the final quarter of last year when it unveils annual results on Tuesday, with analysts expecting a similar figure from Shell, which also reports this week.
BP’s profits, and the progress in selling assets, should allow Dudley to restart dividend payments to shareholders – but the predicted payout of 7 cents a share would be roughly half the pre-disaster level.
Last month BP formally challenged the official estimate of the size of the spill, made by US government scientists, of 4.9m barrels, making it the world’s largest offshore accident. BP argues that scientists have miscalculated the flow rate from the Macondo well, and that the actual spill size could be half the official estimate. It will also point to the number of different estimates of the flow rate made by the US government as evidence of their fallibility, and the EPA is understood to accept that no estimate can be 100% accurate.
BP is thought to be preparing to enter negotiations with the EPA on the issue, although it will be some months before a final estimate is agreed.