BP works on closing the gap
UK supermajor BP said it was "quietly" making progress in improving its lagging performance versus rivals and that this process should add billions to profits in coming years.
"We have made significant progress at BP over the past 10 months, quietly and without fuss, in resetting essential context, in establishing sound, practical objectives and beginning to deliver them," company boss Tony Hayward said.
Howard also said BP was considering how best to realise the value of the Alternative Energy business, which was much prized by his predecessor, John Browne.
"We intend to grow this business predominantly for its equity value," he said.
"Taking stock market valuations for similar companies, we estimate it is already worth between $5 billion and $7 billion. As we go forward we will be looking at how best we can realise that growing value for our shareholders."
Meanwhile, the supermajor said it replaced its annual production by 112% last year, taking its proved reserves of oil and gas to 17.8 billion barrels.
It also added 2.4 billion new barrels to its non-proved resource base which now stands at a further 42.1 billion barrels of oil equivalent.
Hayward said that in a $60 price world BP was confident not only of boosting output over the next four years but of being able to sustain production of at least 4 million barrels per day until 2020 - even with no new discoveries or access to new opportunities.
"However, bearing in mind a rise in exploration spend to nearly $1 billion this year together with significant additions of fresh acreage in established areas such as the deep-water Gulf of Mexico and a continuing drive to access new provinces around the world, we expect to do better than this," Hayward said.
Hayward confirmed likely capital spend for this year at between $21 billion and $22 billion, up from $19 billion in 2007.
Of this, $15 billion was earmarked for upstream, $5 billion for downstream and $1.5 billion for the other businesses, including Alternative Energy. Divestments were estimated at $1 billion. He said the rise reflected a mix of sector inflation and growth. Gearing would remain at between 20% to 30%.
At a strategy presentation, Exploration & Production chief executive Andy Inglis said the company added 2.4 billion barrels to resources in 2007, boosting the resource base to 42.1 billion barrels.
This combined with year-end reserves of 17.8 billion barrels, took resources plus reserves to 60 billion barrels, extending the life of BP's production from 41 to 43 years at current rates.
Inglis estimated 2008 upstream spend at $15 billion, or $17.5 billion including BP's share of spending by TNK-BP and Pan American.