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BP. Bp Plc

495.70
2.90 (0.59%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Bp Plc LSE:BP. London Ordinary Share GB0007980591 $0.25
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  2.90 0.59% 495.70 496.00 496.10 498.75 493.30 495.45 36,110,224 16:35:27
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Petroleum Refining 211.6B 15.24B 0.8934 5.55 84.61B

BP to Book $1 Billion in Restructuring Charges -- 2nd Update

10/12/2014 2:25pm

Dow Jones News


Bp (LSE:BP.)
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By Justin Scheck and Rory Gallivan 

LONDON-- BP PLC on Wednesday became the latest natural-resources company to announce cuts during a time of slumping commodity prices and uncertain demand.

The U.K. oil-and-gas company said it expects to book $1 billion in restructuring charges over the next year. Much of the savings will come from long-planned head count cuts, a spokesman said. The company's exploration-and-production chief also gave an investor presentation Wednesday that said BP "will look to pare back or re-phase spend" on development, by as much as $2 billion next year.

BP's announcement came after mining firm Anglo American PLC said Tuesday it would cut its capital spending for this year and next by at least $1.3 billion as iron ore prices remain depressed. Ivan Glasenberg, the chief executive of resources giant Glencore PLC, said Wednesday the company would reduce its spending on existing operations by about $500 million by 2017. U.S. oil company ConocoPhillips said earlier this week it would reduce capital spending next year by 20%.

BP has said it has been planning cuts for some time to bring its structure in line with its current size--it has shrunk since the 2010 Deepwater Horizon disaster, selling more than $40 billion in assets. With those sales, its production at the end of last year was about 25% lower than before the spill. Yet BP's head count at the end of last year was 84,000, up from 80,000 before the spill.

In a prepared statement Wednesday, BP said falling oil prices and its own streamlining efforts, in light of the big asset divestments, "would be expected to further help BP align its cost base with its smaller footprint and reduced activity levels."

BP said Wednesday it would incur the costs over the next five quarters, including the current quarter. The company said details of the charges and further guidance on the program would be given with each quarter's results.

"We continue to seek opportunities to eliminate duplication and stop unnecessary activity that is not fully aligned with the group's strategy, " BP Chief Executive Bob Dudley said.

BP put a price tag on its restructuring at a time when a barrel of Brent crude is trading below $66 a barrel, down from more than $115 in June. The price drop has forced giant oil companies like BP to re-evaluate the profitability of multibillion-dollar projects they've been investing in for years under higher price assumptions. In a slideshow for investors Wednesday, BP's exploration-and-production chief, Lamar McKay, displayed a chart showing the company's "margin quality expanding" with new, higher-profit projects. A footnote to the chart said BP's "planning price assumptions" include "$100 Brent."

Mr. McKay's presentation also said BP approves new projects at "$80 per barrel at which level we expect a project to generate competitive returns." He said the company also tests projects at $60 per barrel. Falling oil prices, he added, should bring the company's development costs down in coming years.

Mr. McKay on Wednesday also cited its big natural gas projects as being "typically less sensitive to oil price movements." He said the company would have a "progressive dividend policy."

Jason Kenney, an analyst with Santander, said paying dividends next year could require BP to sell further assets--a risk since low oil prices can make it tough to get a decent return for such properties.

Write to Justin Scheck at justin.scheck@wsj.com and Rory Gallivan at rory.gallivan@wsj.com

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