Production Rates | Capital Markets | Capital Expenditure

BP Grows Production; CapEx Cut Again

Share Print Bookmark    |    Tuesday,October 27,2015

BP has reported results for the third quarter of 2015 and set out a medium-term financial frame to balance cash flows by 2017 at around $60 per barrel.

Production

Production for the quarter was 2,242mboe/d, 4.4% higher than the third quarter of 2014. Underlying production* for the quarter decreased by 2.2%, mainly due to higher seasonal turnaround activity. For the nine months, production was 2,220mboe/d, 4.3% higher than in the same period of 2014. Underlying production for the nine months was flat versus 2014.

Capital Expenditure

BP expects organic capital expenditure will be in the range of $17-19 billion a year through to 2017, closer to $19 billion in 2015. Expectations for 2015 capital expenditure were $24-26 billion a year ago and under $20 billion in the second quarter of 2015.

Cash Flow & Debt (operating)

BP reported operating cash flow for 3Q 2015 was $5.2 billion bringing the total for the first nine months of the year to $13.3 billion. Organic capital expenditure over the nine month period was $13.2 billion. At the end of the quarter, net debt was $25.6 billion representing a gearing level of 20.0%, including approximately 1% arising from the agreements in principle to settle with the United States government and Gulf states.

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 3Q 2015 results details

• BP reported underlying replacement cost profit (1) of $1.8 billion for the quarter, compared with $1.3 billion for the previous quarter and $3.0 billion for the third quarter of 2014. Compared with a year earlier, the result primarily showed the impact of sharply lower oil and gas prices but also the benefits of a continuing strong downstream environment and performance and steadily lower cash costs throughout the Group.

• Capital expenditure: Through capital discipline – optimising project economics, phasing spending and through industry deflation – BP expects organic capital expenditure will be in the range of $17-19 billion a year through to 2017, closer to $19 billion in 2015. Expectations for 2015 capital expenditure were $24-26 billion a year ago and under $20 billion in the second quarter of 2015.
• Costs: BP first began work to simplify its organisation and increase efficiency throughout the Group in 2013; this is delivering material results. Controllable cash costs for the Group over the first nine months of 2015 were $3 billion lower than in the same period of 2014. BP expects this work to extend further and by 2017 annual cash costs are expected to be over $6 billion lower than those seen in 2014.
• Divestments: BP’s current divestment programme is nearing completion with total agreed divestments expected to approach $10 billion by the end of 2015 – the total is currently $7.8 billion.
  
• As it continues to actively manage its portfolio, BP expects to agree a further $3-5 billion divestments in 2016 before returning to a rate of around $2-3 billion a year thereafter. Divestment proceeds are expected to provide flexibility to help manage both continuing oil price volatility and BP’s commitments in the US.
• Gearing: Since 2010, BP has maintained gearing in a band of 10-20%, providing financial flexibility to manage uncertainties, primarily those associated with the Gulf of Mexico oil spill. As progress is being made towards completion of the agreements in principle to settle with the US government and Gulf Coast states, BP now intends to manage gearing with flexibility around a level of 20%.

• BP reported operating cash flow for 3Q 2015 was $5.2 billion bringing the total for the first nine months of the year to $13.3 billion. Organic capital expenditure over the nine month period was $13.2 billion. At the end of the quarter, net debt was $25.6 billion representing a gearing level of 20.0%, including approximately 1% arising from the agreements in principle to settle with the United States government and Gulf states.
• For the Upstream segment, pre-tax underlying replacement cost profit (1) was $0.8 billion, compared with $0.5 billion in the second quarter and $3.9 billion in the third quarter of 2014. The lower result compared with a year ago was primarily due to the effect of lower oil and gas prices, partly offset by lower costs and strong gas trading results.
• The Downstream segment continued to perform strongly, reporting a pre-tax underlying replacement cost profit1 of $2.3 billion – up from $1.9 billion in the previous quarter and $1.5 billion in 3Q 2014. Compared with a year earlier, the result benefitted from improved refining margins, strong refining operations and fuels marketing and, again, cost benefits from simplification and efficiency programmes.
• BP reported estimated underlying net income from Rosneft (3) for the quarter of $382 million compared with $110 million in 3Q 2014. As previously announced BP received an annual dividend from Rosneft of $271 million during the quarter.
• During the quarter BP was awarded five new blocks in the UK North Sea. In October it was announced that, subject to government approval, BP was also awarded three shallow water blocks in the Mediterranean Sea off Egypt. The Woodside-operated Western Flank A project offshore Western Australia, the latest phase of the North West Shelf development, began production in October.