BP Writes Off Exploration Assets in Angola
June 29 2017 - 12:54PM
Dow Jones News
By Sarah Kent
LONDON -- BP PLC said Thursday it will write off $750 million
from its second quarter earnings as a result of poor exploration
results in Angola, an oil-rich country that the company has touted
as a pillar of its business.
The British oil-and-gas company said it would give up its 50%
stake in a license off the African country's south coast after
deciding it wasn't worth developing a 2014 gas discovery there. BP
said additional exploration write-offs in the country will also
contribute to the charge, without giving more details.
The shift in exploration strategy comes as BP is working to
rebuild the company in the wake of its fatal blowout in the Gulf of
Mexico in 2010 and a three-year plunge in oil prices that has
rocked the entire industry.
After years of retrenchment, it is now back on the path to
growth with plans to add 800,000 barrels a day of new oil and gas
production by 2020. By the end of the decade, including its stake
in Russian oil giant POA Rosneft, it expects to be pumping 4
million barrels a day -- as much as before the 2010 disaster.
BP said the $750 million noncash charge won't be tax deductible,
but it also won't affect the company's cash flow for the quarter --
an increasingly important metric for investors worried about oil
firms' ability to cover spending and dividend payouts with oil
prices stuck below $50 a barrel.
BP has operated in Angola for decades and counts its operations
there as some of its most important. When BP gained access to
deepwater and ultra deepwater exploration licenses off the
country's coast in 2011, it described the acquisition as a "major
win."
Since then, priorities have changed following a precipitous drop
in oil prices. Companies are increasingly moving away from
expensive exploration in frontier regions, like parts of the Angola
that remain relatively unexplored, to focus on areas where they
already have operations and knowledge of the geology they are
working with.
BP said the decision to write off its Angolan assets is part of
a broader portfolio review, intended to focus the company more on
natural gas and lower-cost oil projects near existing
infrastructure. Those types of investments are expected to make the
company more resilient in a world where oil prices remain low and
more countries shift to lower carbon energy sources like gas and
renewables.
The company pointed to its decision last year to scrap
controversial plans to explore in pristine waters off the coast of
Australia.
"We are making disciplined choices throughout our business,"
BP's exploration and production chief Bernard Looney said. "We are
choosing not to pursue activities that we don't think will deliver
maximum value for our shareholders."
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
June 29, 2017 12:39 ET (16:39 GMT)
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