BP slashes billions from investment plans as it reveals £645m loss

'We have now entered a new and challenging phase of low oil prices' says chief executive Bob Dudley

Bob Dudley, chief executive of BP (Getty Images)

BP and BG Group slashed $9 billion (£5.98 billion) from their capital-spending plans today, bringing the total cuts to planned investment by oil majors to $35 billion as the price of “black gold” continues to languish.

The FTSE 100 giants posted huge damage from the slump — between them announcing fourth-quarter losses of nearly $9 billion on the back of $12.5 billion of writedowns.

The duo signalled they expect a prolonged period of subdued prices as they slashed investment budgets — BP by up to $6 billion and BG by as much as $3 billion.

BP announced a $969m fourth quarter loss today after taking a $3.6bn charge for the period. This was mostly to “reflect the impact of the near-term lower oil price environment” – which has seen the price slump more than 50% since June to about $55 a barrel.

This compared to a $1.5bn profit a year earlier – when the average price of oil was $109 a barrel, compared to $77 in the final quarter of 2014.

Capital expenditure this year will be cut by about a fifth, from the $24-26bn previously indicated to about $20bn.

“We have now entered a new and challenging phase of low oil prices through the near and medium term,” said Bob Dudley.

“Our focus must now be on resetting BP: managing and rebalancing our capital programme and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations,” Dudley added.

BG Group, the oil and gas production arm of the former British Gas, has fared even worse than BP amid the falling prices.

The group announced a $7.9bn loss for the fourth quarter as falling hydrocarbon prices forced it to take an $8.9bn writedown. It also slashed capital expenditure to between $6bn and $7bn – from $8 to $10bn previously.

“The sharp deterioration in commodity prices in the second half of the year has led us to recognise significant asset impairment charges in the fourth quarter,” said the group’s interim executive chairman Andrew Gould.

“In the new environment we are well placed to manage the downturn…We will proactively manage our costs, both capital and operating, to adapt to new business circumstances,” he added.

Mr Gould is holding the fort following Chris Finlayson’s resignation last April after a difficult period at the company.

He will be replaced “shortly” by former Statoil boss Helge Lund, whose lucrative remuneration package was revised in December after a shareholder backlash. The company has not given his start date.

The recent round of investment cuts is helping the price of Brent Crude, which rose by 0.80p a barrel to £55.55 today.

Shares in BP rose by 16.0p to 453.50p because the fourth quarter result was better than expected. BG ticked up 4.3p to 939.80p.