Failed BP deal renews pressure on CEO Dudley

Mon Nov 7, 2011 10:54am EST
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By Tom Bergin

LONDON (Reuters) - The collapse of BP's BP.L planned sale of a $7 billion stake in an Argentinean unit is Chief Executive Bob Dudley's second failed multi-billion dollar deal this year and has renewed investor concerns about his claimed turnaround of the group.

Dudley hinted last month that the oil giant could lift its dividend next February, saying the group had reached a "turning point" after its Gulf of Mexico oil spill. But the failed deal now puts a question mark over those plans.

"As with all things to do with BP the issue is as much to do with risk and this deal failure does highlight execution issues again," analysts at UBS said in a research note.

BP shares traded up 0.5 percent at 1524 GMT on Monday, lagging a 0.3 percent drop in the STOXX Europe 600 Oil and Gas index .SXEP, after the planned sale of its 60 percent stake in Pan American Energy was abandoned.

The decision of buyer Bridas, half-owned by China's CNOOC, to terminate talks, will hit BP's cashflow and make a payout hike harder to deliver.

As the second major deal to fall apart for BP this year -- in May a planned $16 billion share swap and multi-billion dollar Arctic exploration deal with Rosneft collapsed -- analysts said the failure showed the risks around BP's strategy of rapid dealmaking.

BP launched a $30 billion disposal program last year to help pay the $40 billion bill for the spill. The London-based oil giant said this would force it to shrink but that an expansion of exploration and dealmaking would thereafter allow it to grow more quickly.

Rating agency Fitch said that the failure to seal the Pan American deal did not significantly damage BP's financial health because high oil prices have helped it produce strong cash flows.   Continued...

<p>A BP logo is seen on a petrol station in London in this November 2, 2010 file photo. REUTERS/Suzanne Plunkett/File</p>