BP says it will need a crude price of about $40 a barrel in 2021 to cover spending and dividends, down from $60 this year, as chief executive Bob Dudley seeks to reassure investors on the oil major’s growth outlook and finances.
The breakeven level will fall as BP keeps capital spending at no more than $17bn (€16bn), it said. It aims to raise output by 5% a year to 2021 and is targeting returns of more than 10%.
Mr Dudley is seeking to return BP to growth after the 2010 Gulf of Mexico oil spill and the market downturn of the past three years shrank the scale of its operations. The CEO must also show investors he’ll keep spending in check as crude prices remain at half the levels of 2012 and 2013.
“We can see growth ahead right across the group,” said Mr Dudley in a statement. “While always maintaining our discipline on costs and capital, BP is now getting back to growth, today, over the medium term and over the very long term.”
BP’s shares, which rose slightly yesterday, are down 11% this year.
The company said this month that its breakeven oil price would rise to $60 a barrel this year from an earlier assumption of up to $55 because of the cost of buying oil and natural-gas fields in Egypt, Mauritania, and Senegal.
That meant BP was moving in the opposite direction to Exxon Mobil and Royal Dutch Shell, which said cashflow already covers spending.
Mr Dudley told investors and analysts yesterday the breakeven price would steadily drop from this year to $35 to $40 a barrel by 2021.
The company also sees up to $14bn of free cashflow from its oil and gas exploration and production business by 2021 at an average oil price of $55, Bernard Looney, the unit’s boss said at a briefing in London. That compares with guidance last year of up to $8bn of cash- flow by 2020 at $50 a barrel.
The increase includes a little more than $2bn from new fields BP bought at the end of last year; another $2bn from higher oil-price expectations; while extending the period of guidance by a year to 2021 adds $1bn.
Making operations more efficient adds $1bn, and another $9bn to $10bn of free cashflow will come from refining, marketing and trading oil, BP said.
The company plans to start seven projects this year and is working on nine others.
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