BP plc revealed Tuesday that its losses before interest and tax reduced to $1.2 billion in 1Q 2016, from $2.2 billion in 4Q 2015, and stated that it is prepared to further cut its capital expenditure (CAPEX).
Organic CAPEX in the first quarter was $3.9 billion, compared to $4.4 billion in the first quarter of 2015 and BP now expects total organic CAPEX in 2016 to be around $17 billion, which is “broadly consistent” with expectations by oil sector analysts at investment bank Jefferies. In the event of continued low oil prices, BP has also expressed its flexibility to move to between $15-17 billion in CAPEX spend for 2017.
“Despite the challenging environment, we are driving towards our near-term goal of rebalancing BP’s cash flows,” said Bob Dudley, BP group chief executive, in a company statement.
“Operational performance is strong and our work to reset costs has considerable momentum and is delivering results. Furthermore, development of our next wave of material upstream projects is well on track,” he added.
During 1Q, BP signed an agreement to extend the Khazzan license in Oman, a shale gas production sharing contract in China and an agreement to work on future opportunities with the Kuwait Petroleum Company across all lines of business. Two upstream projects have begun production since the beginning of the year; the In Salah Southern Fields project in Algeria and the Exxon-operated Point Thomson project in Alaska.
BP is also progressing its Quad 204 and Clair Ridge interests in the UK, the Khazzan Phase 1 project in Oman, the Juniper development in Trinidad, the Taurus/Libra phase of the West Nile Delta project in Egypt and the Shah Deniz Phase 2 venture in Azerbaijan. The company expects that projects scheduled to start up through 2016 and 2017 will put in place 500,000 barrels of oil equivalent per day of new net production capacity by the end of 2017 compared to 2015.
Production in 1Q was 2.428 million barrels of oil equivalent per day, 5.2 percent higher than the first quarter of 2015 and 3 percent ahead of Jefferies’ expectations. Analysts at Jefferies expect 2Q 16 production to decline quarter on quarter due in part to “planned seasonal turnarounds/maintenance”.
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