By Rory Gallivan
LONDON-- BP PLC expects to book $1 billion in restructuring
charges over the next year as it simplifies its operations and
corporate activities.
The oil major on Wednesday said it would incur the costs over
the next five quarters, including the current quarter, as part of a
broader group-wide program to simplify its upstream and downstream
activities and corporate functions.
The company said details of the charges and further guidance on
the program would be given with each quarter's results.
"The simplification work we have already done is serving us well
as we face the tougher external environment," Chief Executive Bob
Dudley said. "We continue to seek opportunities to eliminate
duplication and stop unnecessary activity that is not fully aligned
with the group's strategy."
BP, which has sold more than $40 billion of assets since the
2010 Deepwater Horizon disaster, had already said it would cut
staff to reflect the company's smaller size. However, Wednesday's
announcement puts a price tag on that effort and shows that even
moves to save money can cut into profit in the short term.
The restructuring comes amid fast-falling oil prices and a
number of moves by big and small oil companies to reduce costs and
scale down capital spending. Earlier this week, Conoco said it
would sharply reduce its capital spending. BP also warned investors
earlier this year that it would scale back its own capital spending
next year by $1 billion to $2 billion. Before that planned cut, BP
had estimated it would spend between $24 billion and $26 billion
next year.
In its statement Wednesday, BP said falling oil prices and its
own streamlining efforts, in light of the big asset divestitures,
"would be expected to further help BP align its cost base with its
smaller footprint and reduced activity levels."
Amid falling prices, BP said about a third of its exploration
and development projects are operated as production-sharing
contracts--insulating it somewhat from lower prices. It also cited
its natural gas projects, which are "typically less sensitive to
oil price movements." It repeated that its projects are approved on
the assumption of $80 a barrel oil, but added Wednesday that it
also tests each project at $60 a barrel to "understand the
resilience of the portfolio at a range of prices." International
benchmark oil has been trading in recent days just above $65 a
barrel.
Write to Rory Gallivan at rory.gallivan@wsj.com
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