British oil giant, BP, posted a 45 percent drop in earnings for the second quarter. The slump provoked a major budget cut, bringing the 2016 investment financial plan to under $17 billion. Despite the bad news, BP’s CEO says that the company will still begin work on no less than three new projects this year.
The announcement of the drop on Tuesday definitely didn’t meet expectations. Analysts were shocked by a smaller contribution from BP’s stake in Rosneft, a Russian oil production company, and larger corporate charges. These charges included those associated with oil spill liabilities in the Gulf of Mexico.
Other companies that posted their numbers for the second quarter included BP’s rivals Eni, Shell, Statoil, and Total. These companies drew attention to the most recent dip in crude prices nearing $44 per barrel. This falls quite short of the $60 prices necessary for oil companies to break even.
BP chief executive, Bob Dudley, says that despite the industry’s current, strenuous environment, capital expenditure budgets have been aided by a dip in related costs. “We’re going to choose our projects really carefully and the cost reductions and re-engineering of the projects has really brought them down to what I think is a very attractive (price range),” Dudley said to Reuters.
Dudley went on to say that BP could make three more final investment decisions in 2016 since already approving its Atoll offshore gas project in Egypt and the expansion of the company’s Tangguh plant in Indonesia.
According to Dudley, an Indian gas project, a project in Trinidad, and the second stage of the Gulf of Mexico’s Mad Dog deepwater oil field could all be greenlighted. BP is projected to increase the oil count to 500,000 barrels per day by the end of next year and another 300,000 barrels per day by the end of the decade.
The refining margins of BP reached a six-year low in the second quarter, a feat that will put the company under pressure in the upcoming months, says BP. The industry giant keeps lowering costs and hopes that the full-year capital expenditure falls under its previous target of $17 billion. According to BP, its 2017 investments could fall as low as $15 billion. “I don’t think BP should go below that because then you start to take away from important growth,” said Dudley.
Article written by HEI contributor Briana Steptoe.