BP targets growth and drops its break-even oil price to $35-40 a barrel
BP said it's "getting back to growth" and will be able to balance its books at an oil price as low as $35-40 a barrel by 2021.
Earlier this month, BP raised its break-even price to $60 a barrel for this year due to higher spending. In a strategy update issued today, chief financial officer Brian Gilvary lowered the target, saying: "Over the next five years we expect this to fall to around $35-40 a barrel for the group overall."
BP's update outlined its medium-term plans for the next five years, saying it expects both of its major operating segments to deliver material growth in operating cash flows.
Upstream and downstream segments will generate pre-tax cash flow of $13-14bn and $9-10bn respectively in 2021 at oil prices around $55 a barrel, BP said.
Ramped up production from new upstream projects is expected to deliver a "material improvement" in BP’s operating cash flow through the second half of 2017. There were six new projects that began production in 2016 and seven will come online this year. Upstream production is expected to grow by average of five per cent a year from 2016 to 2021.
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Gilvary said: “Last year we delivered our targeted $7 billion reduction in cash costs a year early, and capital spending was $8.6 billion lower than its peak in 2013 – without damaging our growth pipeline. We will continue that tight focus on costs and capital discipline and seek further improvements throughout the group."
Group chief executive Bob Dudley said: “In six years we have fundamentally reshaped and built a very different BP. We are now stronger and more focused – fully competitive and fit for a fast-changing future.
Dudley said BP's portfolio strikes a balance between short and long-term value.
"We can see growth ahead right across the group. While always maintaining our discipline on costs and capital, BP is now getting back to growth – today, over the medium term and over the very long term," Dudley said.
Assuming a stable price environment and portfolio, BP now expects return on average capital employed to recover steadily over the next few years to be over 10 per cent by 2021.
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