In line with its industry peers, British oil company, BP, will reduce investments in 2015, saying it is taking action to respond to the likelihood of oil prices remaining low into the medium term and to rebalance its sources and uses of cash accordingly.
The company today reported its results for the fourth quarter and full-year 2014. Underlying replacement cost profit for the fourth quarter was $2.2 billion compared with $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 post-tax net charge for non-operating 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 of 2014.
“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 programme and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations.”
In 2015, BP plans to reduce exploration expenditure and postpone marginal projects in the Upstream, and not advance selected projects in the Downstream and other areas.
As a result, organic capital expenditure in 2015 is expected to total around $20 billion, significantly lower than previous guidance of $24-26 billion. Total organic capital expenditure in 2014 was $22.9 billion, lower than initial guidance of $24-25 billion.