Collapse of second BP deal raises investors’ fears over turnaround

Mr 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.

Analysts at UBS said in a research note: “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.”

The decision by potential 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 £10bn 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 an £18.7bn disposal programme last year to help pay the £25bn 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.

Bridas sent a letter to BP last week terminating the talks, both sides said.

It did not specify its reasons, but cited “legal issues and the way BP handled the transaction” for the deal’s cancellation.