BP trims capital budget by $4-6 billion

BP PLC plans an organic capital expenditure of $20 billion in 2015, down from the previous guidance $24-26 billion. Total organic capital expenditure in 2014 was $22.9 billion, lower than its initial guidance of $24-25 billion.

BP this year plans to reduce exploration expenditures and postpone marginal projects in its upstream segment, and not advance selected projects in its downstream segment and other areas.

Four projects are expected to come into production during 2015, two in Angola and one each in Australia and Algeria.

“We have now entered a new and challenging phase of low oil prices through the near and medium term,” said Bob Dudley, BP group chief executive. “Our focus must now be on resetting BP: managing and rebalancing our capital program and cost base for the new reality of lower prices while always maintaining safe, reliable, and efficient operations.”

Profits down, divestments up

Underlying replacement cost profit for the fourth quarter was $2.2 billion, down from $2.8 billion for the same period in 2013. Full-year underlying replacement cost profit was $12.1 billion compared with $13.4 billion reported for 2013.

BP took a $3.6-billion posttax net charge for nonoperating items in the quarter, mainly relating to impairments of upstream assets reflecting the impact of the near-term lower oil price environment, revisions to reserves, and other factors. As a result, including this charge and other effects, BP reported a replacement cost loss of $969 million for the fourth quarter.

Total group operating cashflow in the fourth quarter was $7.2 billion. For the full year, it was $32.8 billion.

Overall group oil and gas production, including Russia, was 3.2 million boe/d. Excluding Russia, underlying upstream production was 2.3% higher than a year earlier, but reported production of 2.2 million boe/d was 2.6% lower than fourth-quarter 2013, primarily due to the expiry of the Abu Dhabi concession in January 2014.

BP since 2013 has made divestments with a cumulative value of $4.7 billion, and says it expects its divestment total to reach $10 billion by yearend.

Divestments made in 2014 include oil fields on Alaska’s North Slope (OGJ Online Apr. 22, 2014); a 70% stake in two deepwater blocks off Trinidad and Tobago’s east coast (OGJ Online, June 6, 2014); and 50% interest in 17 deepwater exploration leases in the Atwater Valley protraction area of the Gulf of Mexico (OGJ Online, June 16, 2014).

The company also reported plans to divest assets in the Hugoton and Panhandle West fields in Sherman and Moore counties in the Texas Panhandle (OGJ Online, Apr. 14, 2014).

Cost of gulf oil spill

The total cumulative pretax charge for the Gulf of Mexico oil spill at yearend 2014 was $43.5 billion. An additional charge of $477 million was taken in the fourth quarter, reflecting increased provision for litigation costs and additional business economic loss claims and the ongoing costs of the Gulf Coast Restoration Organization, the company says.

The overall charge does not include any provision for business economic loss claims that are yet to be received, processed, or paid, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility.

At the end of the quarter, the aggregate remaining cash balance in the trust and qualified settlement funds was $5.1 billion.

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