BP Output Rises as CEO Hayward Sees Costs Falling $1 Billion More Than Expected by Year-End
Compared to the same period last year, BP’s reported daily production jumped 4 per cent to more than 4 million barrels of oil equivalent in the three months to end-June. Also, the $2 billion reduction in cash costs targeted for 2009 as a whole has already been exceeded and a further $1 billion saving is expected over the remainder of the year, the company said today.
Announcing second quarter replacement cost profits of $3,140 million – up over 30 per cent on the first quarter, chief executive Tony Hayward said BP was delivering good performance in a very tough environment.
“We are in turbulent times, volatile and uncertain. But we continue to steer a steady course through choppy waters. Two years ago we set out to restore our ability to compete more effectively with our rivals in the sector.
"The momentum we established in that process remains very powerful. Despite the current climate, we are making good progress in growing our upstream, turning around our downstream and driving cost-efficiency across the group."
Hayward said progress was underpinned by a simplified organisation, deepening expertise at the operational level and unrelenting focus on operational safety and integrity. Cash costs had been reduced by more than $2 billion in the first half of the year, versus the same period last year.
"We have already surpassed the target we set ourselves at the beginning of this year for cash costs but we are by no means complacent. We will continue to push efficiencies into the group and make sure every dollar counts. Based on this strong progress, we can expect cash costs for the full year to be down by more than $3 billion compared with 2008." Highlights for the quarter were:
- Replacement cost profit of $3,140 million, up 32 per cent from $2,387 million in the first quarter but down 53 per cent on the same period last year
- Reported daily oil and gas production of 4.005 million barrels of oil equivalent, 4 per cent higher than the second quarter of 2008
- Capital spending for the quarter of $4.8 billion and $9.4 billion for the half year
- Net cash from operations of $6.8 billion versus $6.7 billion a year ago
- Net debt of $27.1 billion and gearing at 22 per cent
- An effective tax rate of 35 per cent, unchanged from last year.
BP's dividend for the quarter was 14 cents a share, the same as for the corresponding period in 2008. In sterling terms this represents a rise of 21 per cent year-on-year, a reflection of the stronger dollar.
Hayward said the latest economic data suggested the global economy could stabilise this summer but that any recovery, whenever it comes, would likely be sluggish: "The overall picture is of energy demand now stabilising following significant falls in the first half of the year. We see little evidence of any growth in demand and expect the recovery to be long and drawn out."
He said expected organic capital investment for 2009 of under $20 billion remained in line with previous predictions. Disposal proceeds for the first six months totalled $1 billion and were envisaged at $2-3 billion for the year as a whole.
He added that year on year production growth was expected to continue in the second half, though normal seasonal maintenance turnarounds would impact the third quarter. In the Downstream, with Texas City restored to full capability, overall refining availability rose 5.3 percentage points versus the same period last year, to 93.6 per cent, its highest level since the first quarter of 2005. For the half year, refining and marketing costs were down 15 per cent compared with the same period in 2008.
In remarks scheduled for financial analysts later today, Hayward said the strategy of the past two years remains firmly on track. "In the Upstream we said we would deliver profitable growth, and we are doing so. Costs are coming down, capital efficiency is rising and we expect output to grow again this year.
"In the Downstream we said we would turn around the business and we are doing so. In Alternative Energy we said we would refocus and simplify the business and that is what we are doing. And we are not letting up on driving efficiency across the group.
"Our view remains that the right current balance is to continue to pay the dividend and maintain investment to grow the company. We will continue to use the capacity of our balance sheet while the industry cost structure adjusts."
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