BP to cut spending after price fall

BP will heap more pain on the UK oil industry when it reveals plans for billions of pounds of spending cuts due to the collapse in oil prices.

The company’s annual results tomorrow are expected to show underlying profits slumped by 15% to $11.5bn, with the plunge in the value of the Russian rouble adding to its difficulties.

It is expected to disclose that last year’s spending of $23bn on major projects will come down as it joins other industry giants in reacting to the new lower price environment of around $ 50 a barrel.

The results announcement will be more bad news for the oil industry after the company, which employs 15,000 people in the UK, said last month that it would cut 300 North Sea jobs following a review of its operations.

It come as an oil industry summit involving the UK and Scottish governments, unions and industry figures has been taking place in Aberdeen, with industry body Oil and Gas UK demanding urgent action including tax cuts.

Hundreds of job losses, pay cuts and freezes have been announced by a number of companies in the North Sea region in recent weeks, including BP, Taqa, Petrofac and Wood Group.

BP’s results come a day after US rival Exxon Mobile said earnings fell by 21% due to the sharp slump in oil prices – though the fall was not bad as expected.

Earlier this week rival Royal Dutch Shell said it would cut $15bn from its spending plans over the next three years as it responds to sliding oil prices.

As well as lower crude prices, BP’s Russian profits have been hit by the fall in the value of the rouble after Western sanctions on the Kremlin since the Ukraine crisis.

BP holds just under a 20% stake in Russian oil firm Rosneft, which it acquired when the company sold its half of the TNK-BP joint venture to the Russian company in 2013.

It has also warned that plans to streamline its business will cost it $1bn over the next year.

The restructuring bill reflects the need to slim down its operations following $43bn worth of divestments since the Gulf of Mexico disaster in 2010.

It is still fighting clean-up litigation as a result of the disaster that has so far cost it around $40bn. Its share price is a third below what it was at the time of the Deepwater Horizon oil spill in April 2010.