“This may be the most brutal environment for oil and gas businesses in decades,” CEO Bernard Looney said in a statement.
The company said it planned to spend US$12 billion this year, joining rivals that have announced cuts of around 20% in annual spending on average. BP had previously said its 2020 spending would be “at the lower end” of a US$15 to US$17 billion range.
That will include a US$1 billion reduction in investment in its shale business, known as BPX, where production can be switched on and off relatively quickly, representing a 50% drop from 2019 investment levels.
BPX output will drop by around 70 000 barrels of oil equivalent per day (boepd) in 2020, around 14% lower than its 2019 output of 499 000 boe/d.
BP’s overall oil and gas production is also expected to fall.
Oil prices dropped by 65% in 1Q20 as a result of a big fall in demand following movement restrictions imposed on billions of people around the world to limit the spread of the coronavirus.
The price war between top oil producers Saudi Arabia and Russia added to pressure on prices as the two countries boosted supply to try to win market share.
BP also plans to introduce US$2.5 billion of cost savings by the end of 2021 through the digitalisation and integration of its businesses. Looney said BP would not cut jobs in the next three months.
The company’s US$15 billion asset disposal programme targeted by mid-2021 remains on track, but completion of deals already announced, including the US$5.6 billion sale of BP’s Alaska assets to Hilcorp, may face delays, it said.
BP said it has US$32 billion of cash and undrawn credit facilities.
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