BP Plc said it can slash its spending by as much as 20% this year as the oil market goes into freefall, with some U.S. operations likely to get less investment.
The London-based oil major’s shares have fallen about 40% since the OPEC+ alliance broke down after a showdown between Saudi Arabia and Russia, triggering a price war as the kingdom vowed to send a flood of cheap crude to Europe. BP stock was trading down 7% at 2:40 p.m. London time on Monday.
BP Chief Financial Officer Brian Gilvary said in a Bloomberg television interview that he is confident the company can achieve its $15 billion asset-sale target by the middle of next year and that it’s managing oil’s volatility but isn’t yet discussing returning to paying dividends with shares instead of cash.
The scrip remains in the “armory” of BP’s board and the company may look at returning to the option in the future but “it’s not one we’re talking about right now,” Gilvary said.
Gilvary said that “the obvious places would be onshore” for spending cuts and its U.S. operations would be considered.
“You’re going to see a lot of activity in the Lower 48 ramped down, especially at these sort of levels where we are today,” he said. “But we’ll look across all our projects.”
Crude prices may slump further, Gilvary said, adding that he also sees a “steep” oil-market structure called contango, which indicates an oversupply.
“Oil prices I think could go lower than where we are today,” Gilvary said. “The key for a company of our size and scale is to make sure we have the flexibility to manage that volatility.”
Asset Sales
Gilvary said BP had already agreed more than $9 billion of its asset-sale target by the end of last year, but some of those disposals would be dependent on the price of crude. Oil in London fell as much as 13% on Monday and was trading down 9% at 2:32 p.m. local time.
BP is the latest to crimp spending plans as oil companies look to protect their balance sheets. Royal Dutch Shell Plc hasn’t yet announced any changes to its spending program but rivals in America have.
U.S. crude producers are cutting back on capital spending and curbing drilling as most shale output becomes unprofitable due to the collapse in oil prices. Apache Corp. became the latest American shale oil producer to cut its dividend and slash capital spending in response to the biggest price crash in a generation.
BP Chief Executive Officer Bernard Looney on Friday announced plans to lower spending, but vowed to press ahead with his plans to transform into a greener energy giant.
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