Posted on 12/10/2014 6:37:01 AM PST by thackney
BP expects to take $1 billion in restructuring charges over the next year as it plans to accelerate job cuts and pare back its oil production business amid crumbling oil prices.
The British oil giant is gearing up to weather at least two years of lower oil prices and the contraction in the oil industry that goes with it, making plans to deepen cuts even after slashing $32 billion in oil-producing assets over the last 18 months, BP executives told investors in London on Wednesday.
In a written statement released in conjunction with the investor presentation, BP CEO Bob Dudley said shrinking the company by $43 billion in assets since last year has served it well in the tougher market, but it will continue to “eliminate duplications and stop unnecessary activity.”
“We are clearly a more focused business now,” Dudley said. “Our goal is to make BP even stronger and more competitive.”
BP didn’t say how many jobs or what costs will be cut, or how much it may rein in next year’s $24 to $26 billion budget. But the restructuring charges – one-time costs paid as a company fires employees or shuts down operations – are the latest sign that the oil industry will face a rocky 2015 after crude prices have fallen from around $100 to about $65 a barrel in recent months.
News of BP’s future charges comes two days after Houston oil company ConocoPhillips said it would slash its 2015 budget by 20 percent, to $13.5 billion.
Many of the jobs BP has targeted for layoffs so far, the back-office positions and the mid-level supervisors in its oil production and refining businesses, are housed in the United States and the United Kingdom. The London-based oil major has 84,000 employees worldwide and 10,000 workers and contractors in Houston.
The company said it expects the charges to run through the next five quarters, including the current October-December period.
In an investor presentation, BP upstream CEO Lamar McKay said historically it takes around two years for oil prices to recover after sharp declines.
He said over the past 18 months, the cost to produce a barrel of oil – including things like steel and labor – has inflated and caught up with the high oil prices of the past three years, making it a less profitable business. Lower oil prices could change that.
“With oil prices where they are today, we expect this natural self-correction mechanism to become evident in the supply chain deflation,” McKay said.
McKay said BP is reviewing whether to cut its 2015 capital budget by more than the $1 to $2 billion it had projected in October. “A lot depends on the pace of deflation,” he said.
BP said it is on track to boost its oil production by more than 900,000 barrels of oil equivalent a day by 2020. It said its resource base of oil and gas reserves is forecast to decline 3 to 5 percent a year through 2018.
I heard this on the (Houston) news break, the other day. They didn’t say how many, but that BP would be laying off, at the Houston offices.
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