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
Access Investor Kit for BP plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0007980591
Access Investor Kit for Anglo American Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B1XZS820
Access Investor Kit for Anglo American Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US03485P2011
Access Investor Kit for BP plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0556221044
Access Investor Kit for ConocoPhillips
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20825C1045
Subscribe to WSJ: http://online.wsj.com?mod=djnwires