$70 Oil Threatens Big Oil Projects

$70 Oil Threatens Big Oil Projects$70 Oil Threatens Big Oil Projects

Big Oil’s prized projects won’t face major cuts unless oil prices fall below $70 a barrel, BP’s chief financial officer told investors.

“We’re not expecting to adjust capital expenditures in response to oil prices,” Fuel Fix cited BP CFO Brian Gilvary as saying in a conference call. “That would put in peril the future growth. The balance sheet could more than comfortably handle $80 a barrel.” Sinking oil prices have put oil company investors and suppliers on watch for any signs that they’ll trim spending next year. So far, BP isn’t making any big plans to cut spending because of oil prices, Gilvary said.

“Where we have room at the margins to pare back or reface spend without compromising future growth, we will do so,” he said. “Relative to current guidance, I expect this could make a difference of $1 to $2 billion in 2015, with lower spend in the downstream following the completion of the Whiting refinery project.”

$70 Oil

It was the first word from the international oil majors, and it came a day after Goldman Sachs forecasted oil prices would fall to $70 a barrel in the second quarter of 2015 as supply outpaces global demand.

Next year, Gilvary said, BP is planning to focus on streamlining activity, continuing a process that began some 18 months ago as BP has sought to rein in costs and resize its businesses.

Gilvary said a $1 billion to $2 billion downward revision in 2014 spending wasn’t a result of planning for lower oil prices.

 “Our industry tends to be self-correcting, so one would expect some deflation if current oil prices remain low. We have a lot of flexibility to deal with a sustained period of lower oil prices.”

Sliding Profits

BP’s third-quarter profits fell 63 percent as the Russian ruble’s value dropped significantly against the dollar and lower Russian crude prices sank earnings from its stake in state-owned Rosneft.

The London oil giant collected a profit of $1.26 billion, or 42 cents a share, in the July-September period, compared to $3.5 billion, or $1.11 a share, in the same three months last year. Revenues declined from $98.2 billion to $94.8 billion. BP boosted its quarterly dividend, to be paid in December, by 10 cents.

BP’s third-quarter daily oil production dipped less than 1 percent to 3.15 million barrels of oil equivalent, as a seven-decade oil production pact with international oil companies ended in Abu Dhabi earlier this year. BP’s upstream profits fell 20 percent.