LONDON -- Despite the turmoil in credit markets and the falling oil price, BP PLC remains in a strong financial position and will continue to look at opportunities for acquisitions, CFO Byron Grote said Tuesday, reported Dow Jones. Problems in credit markets are slowing the planned sale of BP's U.S. convenience stores, he said during a webcast, but they also offer BP Group acquisition opportunities in other segments of the industry worldwide.
Credit has been drying up and potential buyers—possibly smaller franchisees and even some jobbers—may be having difficulty securing credit [image-nocss] or coming up with BP's asking prices for the stores. BP declined to comment further on the sale or to elaborate on Grote's statement for CSP Daily News.
Although not commenting directly on the sale of BP's c-stores, Dan Gilligan, president of the Petroleum Marketers Association of America (PMAA), recently told CSP Daily News, "The big banks are being particularly difficult right now for any small business, especially if real estate is involved. The big banks have really complicated loan criteria, and if the loan involves real estate, it's getting a much harder look. If you're expanding or if you want to expand, it's hard to get those loans."
BP's U.S. Convenience Retail unit announced a plan in November 2007 to sell its approximately 700 company-owned and -operated retail sites over a two-year period. BP is marketing these sites predominately as franchise-operated sites, both dealer- and jobber-owned. It will also market some sites as dealer and jobber fuel-only sites. This approach is in line with BP's strategic plans to expand and grow the ampm brand to reach more consumers with its products and services.
The company also declined to specify how many of the sites have been sold so far, but a significant number have been sold. In June, BP spokesperson Scott Dean told CSP Daily News, "We are on track to exit company-owned and operated sites by the end of 2009."
BP is still able to access debt markets at attractive interest rates only a little bit above treasury bonds, Grote said. Its net cash flow from operating activities was $14.9 billion in the third quarter and $32.5 billion for the year to date.
The company is most likely to favor individual asset deals of an order of magnitude of several billion dollars, rather than full-scale corporate takeovers, he said.
Grote said the recent sharp fall in oil prices means BP's bumper third-quarter net profit of $8.05 billion, up 82.7% from a year earlier, may not be repeatable. Oil demand in the United States and most other key markets in which it retails fuel is weak and still falling, he said.
It is possible the oil price could drop further, although if it did it would most likely be a temporary dip and BP's dividend is sustainable all the way down to $40 a barrel, he added.
"Our focus on costs and efficiency is more important than ever in today's weaker and more volatile [oil price] environment," Grote said.
When asked if the falling oil price would scale back BP's spending plans, Grote said there is flexibility in BP's expected capital expenditure of $21 billion to $22 billion a year, "but having a steady level of activity is very important...as we continue to pursue growth in upstream production volumes."
Final decisions on capital expenditure will be given at the strategy update in the first quarter of 2009, he said.
Click herefor BP's full third-quarter press release.
BP markets more than 15 billion gallons of gasoline every year to U.S. consumers through 13,000 retail outlets. The company is the single, global brand formed by the combination of the former British Petroleum, Amoco, Atlantic Richfield (ARCO) and Burmah Castrol. The ampm brand was founded in 1978 in Southern California by ARCO. The brand became part of BP when it acquired ARCO in 2000.
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