BP RESPONDS TO COVID-19 PANDEMIC AND MARKET DISRUPTION
BP set out actions it is taking in response to the COVID-19 pandemic and ongoing market disruption. It also provided an update on factors expected to affect its first quarter results.
Chief executive Bernard Looney said:
“At BP we are mobilising in our own way across the BP world, taking action with three clear objectives: protecting our people; supporting the communities where we live and work; and strengthening our finances.
At the same time, we are in action to protect the financial health of BP. This may be the most brutal environment for oil and gas businesses in decades, but I am confident that we will come through it – we know what to do and we have done so before. And we also entered this environment in great shape with good operating momentum and financial discipline, strong liquidity and extensive optionality in our portfolio. We remain committed to growing sustainable free cash flow and distributions to our shareholders over the long term. “
• Divestment programme: BP’s existing divestment programme to deliver $15 billion of announced transactions by mid-2021 remains on track. The phasing of receipt of $10 billion of divestment proceeds by the end of 2020 may be revised as transactions complete, particularly while volatile market conditions persist. This includes the sale of our Alaskan business to Hilcorp which we continue to expect will complete during 2020, subject to regulatory approvals. We will provide further information on this transaction going forward, as appropriate.
To date, $9.6 billion of transactions have been announced since the start of 2019, with around $3.4 billion of cash proceeds received. This divestment programme is underpinned by a wide range of options, including assets in less commodity-sensitive businesses where demand remains strong.
• Capital expenditure: We now expect 2020 organic capital spend to be around $12 billion, around 25% below our prior full-year guidance. In Upstream, this includes a reduction of around $1.0 billion in spend on short-cycle onshore activity, including in BPX Energy, as well as deferral of certain exploration and appraisal activity and optimisation of our major project spend. In Downstream, we expect a reduction in spend of around $1.0 billion, which includes reduced spending across our fuels marketing, refining and petrochemicals businesses.
The expected impact of these capex interventions on 2020 underlying Upstream production includes a current reduction of around 70 thousand barrels equivalent per day (mboed) attributable to BPX Energy. Looking ahead, full year 2020 underlying Upstream production is expected to be lower than in 2019.
• We expect to achieve around $2.5 billion of cash cost savings by the end of 2021, compared with 2019, with digitisation and increased integration across the group as key drivers of this next phase of cost efficiencies. Some of these cost savings may have associated restructuring charges, which will be reflected as appropriate in our financial disclosures.
• Liquidity: BP has around $32 billion of cash and undrawn facilities available at the end of the first quarter 2020. Last week S&P reaffirmed BP’s A- credit rating while revising its outlook from positive to stable. And today Moody’s reaffirmed BP’s A1 credit rating and revised its outlook from stable to negative.
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