Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BP plc (ADR) (BP): This Company’s Latest Move Highlights Dilemma for Oil Companies

Last Wednesday, British oil giant BP plc (ADR) (NYSE:BP) announced that it had put its U.S. wind power assets up for sale, as the company continues its strategy of focusing on more profitable oil and gas operations.

BP To Pay Massive Fine, More To ComeIf it receives a favorable offer, the company thinks it can create more value for shareholders by divesting the wind assets, which are estimated to be worth some $1.5 billion.

Not only does the decision highlight BP plc (ADR) (NYSE:BP)’s overarching focus on profitability, especially in the wake of the infamous 2010 Gulf of Mexico oil spill, it also underscores a major dilemma that energy companies face – choosing between the need for immediate profits and the option to invest in renewable energy sources over the long teram. Let’s take a look.

Beyond petroleum?
BP plc (ADR) (NYSE:BP)’s move to sell its wind power assets may come as a surprise to some, especially considering that the company once referred to itself as “Beyond Petroleum,” reflecting its determination to expand beyond its core oil and gas businesses.

But now, the need to remain profitable appears to be overpowering its prior focus on renewable energy, which began in earnest under Lord Browne’s leadership from 1995 to 2007.

If the company sells its wind power assets, its biofuels business, which consists primarily of ethanol production facilities in Brazil, would be the last remaining artifact of its earlier push into alternative energy.

More like “Back to Petroleum”
Though a company spokesman denied that the recent move signals a departure from alternative energy, BP plc (ADR) (NYSE:BP)’s decisions over the past few years suggest otherwise.

BP plc (ADR) (NYSE:BP)’s CEO Bob Dudley recently announced that the company has given up on solar, after more than three decades of unprofitable attempts. The company has also ditched plans to develop carbon capture and storage technology, after it threw in the towel on a $500 million Scotland plant in 2007. And last year, it abandoned plans to construct a cellulosic biofuel plant in Florida, a facility that would have turned biological materials, such as wood, grasses, and plants, into ethanol.

Since the infamous 2010 Deepwater Horizon incident, the company has embarked on a highly publicized downsizing effort. Since it sold its Texas City refinery and related inventory to Marathon Petroleum Corp (NYSE:MPC) last fall, it has parted with some $38 billion of assets. To date, the company has divested half its pipelines and upstream installations, as well as a third of its producing wells.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.