On April 28, BP published its results for the first quarter of 2015, in which underlying replacement cost profit for the quarter was $2.6 billion compared with $3.2 billion for the same period in 2014 and $2.2 billion for the fourth quarter of 2014.
“We are resetting and rebalancing BP to meet the challenges of a possible period of sustained lower prices,” said Bob Dudley, BP group chief executive. “Our results today reflect both this weaker environment and the actions we are taking in response. We are continuing to progress our planned divestment program, we are resetting our level of capital spending, and we are addressing costs through focusing on simplification and efficiency throughout BP.”
The company’s report stated that oil and gas prices in the quarter were sharply lower than a year earlier. Brent crude averaged $54 per barrel compared with $108 in the first quarter of 2014. This was the lowest quarterly average Brent price since the first quarter of 2009. The Henry Hub gas marker price averaged $2.99 per million British thermal units, 40% lower than a year earlier.
BP remains on track to divest a further $10 billion of assets by the end of 2015. This total has now reached $7.1 billion, including the agreement to sell BP’s interest in the CATS business in the UK North Sea.
Organic capital expenditure in the first quarter was $4.4 billion and Dudley confirmed BP’s reset expectation of $20 billion total organic capital expenditure for 2015. “We will also look to take advantage of any opportunities presented by the lower price environment to further reduce capital expenditure or costs,” he added.
Operating cash flow for the quarter was $1.9 billion compared with $8.2 billion a year earlier. The quarter’s operating cash flow included a working capital build of $2.5 billion. At the end of the quarter, BP’s net debt was $25.1 billion, equivalent to a gearing level of 18.4%.
BP’s upstream segment reported underlying pre-tax replacement cost profit of $0.6 billion for the first quarter of 2015 compared with $4.4 billion for the first quarter of 2014. The result included a $545 million loss for BP’s US upstream business. The upstream result was affected by lower oil and gas prices, weaker gas marketing and trading, and $375 million costs associated with the cancellation of contracts for two deepwater rigs in the Gulf of Mexico no longer required for BP’s reset drilling program. This was partly offset by the positive impacts of higher oil and gas production, lower exploration write-offs, and cost benefits from simplification and efficiency work throughout the segment.
Underlying pre-tax replacement cost profit for BP’s downstream segment was $2.2 billion for the quarter, compared with $1 billion in the first quarter of 2014.
BP, which has a 19.7% stake in Russia’s state-owned Rosneft, reported that its estimated underlying net income from Rosneft was $183 million compared with $270 million in the first quarter of 2014.
At a presentation for investors on Dec. 10, 2014, BP presented its strategy and plans for its upstream oil and gas business, which include spending $1 billion in restructuring charges through 2015, along with hundreds of job cuts and structural changes.