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Vol. 23, No.31 Week of August 05, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

BP profits climbing

Profit for quarter $2.8 billion; company continues to assume $50 to $65 oil prices

Alan Bailey

Petroleum News

In a July 31 earnings call, reporting BP’s results for the second quarter of this year, the company’s group chief executive, Bob Dudley, commented that BP’s underlying global profit for the quarter had been $2.8 billion, compared with $2.6 billion in the first quarter and $700 million a year earlier. Dudley attributed this strong performance to the disciplined execution of the strategy that the company had established at the beginning of 2017.

BP has said that its strategy emphasizes value over volume and focuses on returns when making investments, while also maintaining a strong safety record.

Growing oil demand

Dudley said that continuing growth in the world economy is supporting strong oil demand growth. Economic growth is also supporting an increasing demand for natural gas, in particular Asian demand for liquefied natural gas. As stocks of crude oil in the developed world have dropped from the excess of recent years to more normal levels, oil prices have trended higher, supported by strong demand growth.

However, there are a number of significant uncertainties, including oil supply disruptions in countries such as Venezuela and Libya; questions over future U.S. sanctions on Iranian oil exports; and U.S oil infrastructure bottlenecks, particularly relating to the transportation of oil from the Permian basin in the Lower 48. Given these uncertainties, BP continues to plan on an oil price in the range $50 to $65 per barrel, Dudley said.

Purchase of BHP assets

In the context of high-grading the company’s upstream portfolio, Dudley talked about BP’s takeover of all of BHP’s U.S. onshore assets in a deal that was announced on July 27. The deal will give BP access to the liquids-rich Permian-Delaware basin, and to the Eagle Ford and Haynesville basins, adding high quality assets and more than 4.6 billion barrels of oil equivalent resources to the company’s Lower 48 portfolio, Dudley said.

Dudley said that BP anticipates offsetting some of the cost of the BHP assets through the sale of $5 billion to $6 billion in assets, predominantly from BP’s upstream business. BHP has previously announced that it was selling its Lower 48 assets to BP for $10.5 billion.

In the long term, BP anticipates these newly acquired unconventional oil and gas assets becoming an important addition to the company’s options for growth: The assets are expected to add $1 billion to the company’s upstream pre-tax cash flow by 2021, Dudley said.

The Kuparuk swap

Dudley also cited BP’s recently announced swap with ConocoPhillips of BP’s interests in the Kuparuk River field on the North Slope for an increased BP interest in the Clair field in the North Sea as another example of the company following its strategy of high grading its portfolio. The concept is to deepen the company’s portfolio in core areas while creating value by divesting assets to other companies, Dudley said.

Dudley also commented on the implementation of the company’s APEX system on more than 1,000 wells that the company operates in Alaska. The APEX digital technology, using sensors and data compilation, enables the company to optimize production through live monitoring and modeling of what is happening. During the earnings call question and answer session, Dudley commented that the use of this type of technology is evolving much faster than the company had expected and is producing astounding results through the ability to speed up decision making.

Global LNG

Asked about whether BP has a sufficiently large presence in the global LNG trade, Dudley responded that, given the company’s LNG projects in various parts of the world coupled with several LNG offtake agreements, the company is currently trading a lot of LNG. He commented on the Alaska LNG project, which, he said, has been talked about for years.

“We’ll see about that but it’s not a burning desire in the portfolio,” he said.

In May BP signed a precedent agreement for the sale of Prudhoe Bay gas to the Alaska LNG project.

The energy transition

In terms of BP’s strategy for addressing concerns about carbon emissions and the transition towards a low carbon future, Dudley reiterated his company’s strategy, announced earlier this year. That strategy involves reducing emissions from the company’s own operations, improving the company’s products in ways that can reduce carbon emissions, and creating new low-carbon and renewable energy businesses.


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