Three major upstream projects – one in Australia and two in Angola – started production last year for BP, and another in Algeria is expected to start-up shortly.
The Australian project is Greater Western Flank 1 - in which BP has a one-sixth interest - part of Woodside's North West Shelf project.
The UK supermajor announced yesterday it made a replacement cost loss of $US2.2 billion ($A3.14 billion) for the December 2015 quarter and $6.5 billion for 2015 overall.
And it is bracing for more pain, also announcing yesterday it was slashing the number of staff and contractor roles in its upstream business segment by around 4000 this year and up to 3000 from its downstream unit by the end of 2017.
BP also took $2.6 billion in non-operating post-tax charges last quarter, mainly related to upstream asset impairments along with restructuring charges, which amounted to $1.5 billion over the past five quarters – a total that is expected to approach $2.5 billion by the end of this year.
The lower underlying result was mainly due to the heavy hit to its upstream segment, which reported a pre-tax loss as Brent crude averaged $US44/barrel in the December quarter compared to $77/bbl a year earlier.
The average Henry Hub US gas marker price was lower too, just $2.27/million British thermal units compared with $4.04/MMbtu a year prior.
“I might characterise the outlook as being lower for longer, but not lower forever,” BP CEO Bob Dudley told investors yesterday, noting also that the industry’s US oil production had started to decline and that late this year, crude demand may grow beyond the current oversupply.
BP chief financial officer Brian Gilvary said the company would keep its capital frame “under review”
“Should current conditions persist for longer than anticipated, we expect that all the actions we are taking will capture more deflation and so drive the point at which we balance our organic sources and uses of cash lower than the $60/bbl that we indicated at last quarter’s results,” he said.
Given that the bill for the 2010 Deepwater Horizon oil spill that killed 11 people has topped $29 billion, BP appears to have done all it can to stay financially disciplined while still planning for growth, having signed up to sell up to one million tonnes per annum of LNG to China in a deal with up to $10 billion last October.
The company gained new access in Egypt and the Gulf of Mexico; extended its relationship with Rosneft in Russia; and took an interest in the TAAS venture and associated exploration opportunities in East and West Siberia.
BP also took final investments decisions on four new major upstream projects last year, including the large West Nile Delta project in Egypt.
The company managed to drive its annual controllable cash costs $3.4 billion lower last year than in 2014 and is on track to be close to $7 billion lower in 2017.
The super-major has also now completed the $10 billion divestment program announced in October 2013 and plans a further $3-5 billion this year.
