BP’s chief executive Bob Dudley warned that this year is also “going to be tough” as he revealed the tumbling oil price had pushed the group to its biggest-ever annual loss in 2015 – and announced thousands more job cuts.
Shares in the oil giant dived 8.68 per cent as BP reported a $6.5bn (£4.5bn) loss and said it would axe 3,000 jobs worldwide in “downstream” refining.
These redundancies will be made by the end of 2017 and come on top of the 4,000 job cuts announced last year at BP’s “upstream” oil and gas production unit. The UK will not be affected by the latest cuts but a large number of staff are expected to lose their jobs in the upstream cull.
Mr Dudley was frank about short-term prospects for the oil price, which is down around 70 per cent since the summer of 2014, when it was $115 a barrel. It averaged just $44 a barrel in the fourth quarter of 2015, against $77 in the same period a year earlier.
However, he said the price would eventually recover – without giving a timescale. “Oil prices will be lower for longer, but not for ever. The cost base of the industry has to go down. It’s very tough for everyone in our company but I remain confident.”
Mr Dudley added that “2016 is going to be tough, particularly the first half”, although he pointed out that a considerable reduction in costs in recent months had helped to offset the declining oil price.
For many companies the pressure could become too great this year, Mr Dudley said, although BP would not be among them. “We will see companies who are overleveraged going through extreme stress this year, especially in North America. But you won’t see us insolvent, that’s for sure,”
Mr Dudley insisted that the North Sea had a viable future under a lower oil price, with big fields such as Clair, to the west of Shetland, likely to ensure the industry continues into the 2050s. There is also a lot of money to be made from the big decommissioning projects that will have to be undertaken in the coming decades as production comes to an end in many ageing fields and the infrastructure needs to be dismantled, he added.
“There will be pain up there. The reality is the North Sea is a mature oil province and it has been declining for some time. So you need big projects to come and breathe life into them – but it’s still going to decline. However, Aberdeen is still one of the great oil centres of the world.”
BP also announced a fourth-quarter loss of $2.2bn as weak energy prices forced the company to take $2.6bn of writedowns on fields in the Gulf of Mexico and shale gas assets in Ohio and Libya.
BP’s results come after the US oil giant Chevron announced its first quarterly loss in 13 years last week, while Shell has warned that its profits fell by about half in 2015; Shell reports its final figures on Thursday.
Meanwhile ExxonMobil, the world’s largest listed oil group, posted its smallest quarterly profit in a decade and said it would cut spending this year by a quarter. Its fourth-quarter profits fell 58 per cent to $2.78bn.
Shares in BP closed down 31.85p at 335.1p.
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