BP unveiled its long-term strategy and how it’s managing the company’s upstream business in a presentation to investors, including reducing capital spending by US$1-2 billion across the group, which could incur $1 billion in restructuring charges over the next five quarters.
Dudley. From BP.
In the past 18 months, BP says it has been working to right-size the organization as a result of completing more than $43 billion of divestments to make BP stronger and more competitive.
In the presentation, Lamar McKay, BP upstream chief executive, also reviewed the macro-environment and context of recent developments in oil prices.
One of its goals for the upstream team between now and 2020, will focus the start-up of a suite of new projects, which are expected to be capable of adding over 900,000boe/d of net incremental production to its portfolio by 2020.
“Although the current environment is challenging, BP is well-positioned to respond and manage our upstream business for the long term,” says McKay. “We expect to see growth from our conventional and deepwater assets and an increasing contribution from gas. And we also have a quality pipeline of opportunities that we believe are capable of extending underlying growth well beyond 2020.”
Approximately one third of BP’s upstream projects are operated under production sharing contracts. The company also invests in high quality gas projects that are not as sensitive to oil price movements. BP says that importantly, while the company approves projects at $80 a barrel, it also already tests each at $60 a barrel to understand the resilience of the portfolio at a range of prices. It will also continue to consider lower price sets as appropriate.
“We have already been working very hard over these past 18 months or so to right-size our organization as a result of completing more than $43 billion of divestments,” says Bob Dudley, group chief executive. “We are clearly a more focused business now and, without diverting our attention from safety and reliability, our goal is to make BP even stronger and more competitive.”
BP's annoucement comes just after Total's decision to restructure its exploration and production branch into five geographical divisions, an exploration division and five functional divisions.
Across the Group, BP has said it will be looking to pare or re-phase capital expenditure without compromising safety or future growth. In October, BP told investors this could result in reductions of $1 billion to $2 billion in capital expenditure across the Group in 2015 against guidance of $24 billion to $26 billion laid out in March. This will be reviewed further as part of the 2015 plan, recognizing the current outlook for oil prices.
Last month, BP announced it was assessing a further phase development on its west of Shetland Clair field, which could see another new, large central processing facility built in the field. The Clair field is the largest undeveloped hydrocarbon resource in the UKCS, with an estimated 7-8 billion boe.