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British energy giant BP plc (BP - Analyst Report) recently declared the appointment of Richard Herbert as its new head of exploration. Herbert will replace Mike Daly who will retire at the end of 2013.

Herbert would join BP from Talisman Energy (TLM - Analyst Report), where he is the executive vice president for exploration since 2009. Prior to that Herbert had a six-year stint with TNK-BP in Russia, first as vice president of exploration and then as executive vice president for technology.

Considering Herbert’s expertise in exploration and his long managerial experience around the world, he can easily be labeled as a veteran in the sector. We expect him to provide meaningful support to BP’s upstream and exploration strategy.

Going forward, the U.K. giant expects its deepwater segment to form an integral part of its business goal as it is the largest leaseholder in the Gulf of Mexico (GoM) region, with stake in more than 700 leases. In the deepwater GoM region, BP currently has seven rigs drilling this year, up from five rigs in the recent past. Another rig is expected to be added later in the year.

BP has a strong pipeline of projects and expects four additional upstream ventures to commence by the end of 2013. Of these, Angolan LNG and Atlantis North Expansion commenced operations in the first half of 2013, while Australia-North Rankin phase 2 and Azerbaijan-Chirag are on track to start production in the second half.

Six more project start-ups are expected by next year. Altogether, BP has about 50 major assignments through the decade. Eleven of these involve more than $10 billion in total cost.

During 2013, the company plans to drill 15–20 explorations wells, up from 9 in 2012. The company has already completed 4 wells in Brazil, North Sea and India, with 11 more exploration wells underway in the GoM, Brazil, Angola, Egypt, Jordan, India and Indonesia. In fact, BP doubled its 2013 upstream spending budget to $2.5–$3 billion over the last few years.

However, BP’s earnings and revenues decreased on an annualized basis during the second quarter. Earnings in upstream experienced a decline due to lower liquids price realization and higher costs. Total production also fell on an annualized basis mainly due to field declines and divestments. Thus, the results raise concerns with respect to its performance in the coming years.

U.K.’s second largest oil company by market value after Royal Dutch Shell plc (RDS.A - Analyst Report) is supported by a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months. However, there are other stocks in the oil and gas sector such as Enerplus Corporation (ERF - Snapshot Report) which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.
 

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