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Chevron Chops Capex Budget In Half Over 4 Years, Lays Off Another 7,000

10/30/2015

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By 2018, Chevron may be spending only half of 2014 capital expenditure levels. That would be a massive $20 billion reduction in annual investment spending in just four years.

In budget commentary this morning, Chevron communicated a much bigger cut than expected for 2016 and outlined budget contraction through 2018. Specifically, Chevron plans to cut capital and exploratory expenditures for 2016 to $25-28bn, roughly 25% below 2015 levels. About a month ago, we outlined expectations for a 20%+ reductionin North America E&P spending next year, but global spending contraction has been expected to lag North America. Chevron's news shows global industry contraction next year could be worse than expected.

By 2017-2018, the oil major expects further reductions will take spending down to the $20-24bn level. The low end of this guidance range is approximately half of the company's 2014 budget of $39.8bn. 
The massive curtailment of spending wasn't the only jarring news in Chevron's 3Q report. Chevron's total headcount will be reduced by 10%, representing 6-7,000 more O&G job cuts. This is well past trimming the fat - muscle is being cut now.
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The only silver lining in the news is that these cuts (and similar cuts in the pipeline from Chevron's peers) will lead to the kind of global oil production response necessary to set the stage for recovery. And deep cuts like this suggest the response will come sooner rather than later.
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PictureChevron CEO John Watson; Source: Bloomberg
"Changing Outcomes Within Our Control"
“We expect capital and exploratory expenditures for 2016 to be $25-28 billion, roughly 25% lower than this year’s budget,” CEO John Watson said. But the Capex cuts will not stop next year. "We expect further reductions in spending for 2017 and 2018, to the $20 to $24 billion range, depending on business conditions at the time....We are focused on improving results by changing outcomes within our control."


Pursuant to its cost-cutting strategy, Chevron says its operating and administrative expenses are 7% lower than last year, and the company expects further reductions "in the quarters ahead.” 
As a consequence of this lower investment over the next three years, Watson said, “we anticipate reducing our employee workforce by 6–7,000.” This number is inclusive of the 1,500 layoffs announced earlier this year. 

In August, Chevron informed the Houston Workforce Commission that it would start cutting jobs in Houston in October. In late July, the company said it would shed its workforce in Houston by 950 jobs, in addition to 500 jobs at its headquarters in San Ramon, California, 50 international positions and 600 contractor jobs.

In its August notification letter to the Texas Workforce Commission, Chevron said, "In light of the current market environment, Chevron is taking action focused on increasing efficiency, reducing costs and focusing on work that directly supports business priorities."

Stock On Track For Worst Performance In 13 YearsThe decisions were made even as the major reported a quarterly profit that exceeded analysts’ expectations.

Chevron also said it is adhering to previously announced plans to increase production 20% by the end of 2017 and continue dividend payouts to investors, even as low oil prices contribute to the erosion of cash flow for the company. 
​
The second-largest US oil producer's stock is on track for the worst annual performance since 2002- dropping 20% this year so far. Bloomberg observed that "every $1 decline in the average quarterly price of Brent crude reduces Chevron’s cash flow by $325 million to $350 million."

​Source: Oilpro.com
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BREAKING NEWS: Halliburton confirms additional job cuts at management levels

9/23/2015

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By: Suzanne Edwards

Houston-based Halliburton Co. (NYSE: HAL) has confirmed that the company will be making additional job cuts that will specifically target management positions, according to an internal communication obtained by the Houston Business Journal.

In it, Jeff Miller, Halliburton's president and director, outlines Halliburton's cost-cutting measures.


"We must continue to manage through this extended industry down cycle by implementing additional cost reduction measures to protect the interests of all stakeholders," Miller said in the memo. "Unfortunately, this means that additional staff reductions are underway, with the majority of the reductions in North America – the region hit hardest by market conditions."

The communication went on to say that Halliburton will "flatten" the North America business by eliminating multiple levels of management and additional headcount "commensurate with market activity levels."

The memo did not give any specific figures, but did say that those directly affected by the job cuts would be notified within the next two weeks.

These job cuts are unrelated to the pending acquisition of Houston-based Baker Hughes Inc. (NYSE: BHI), said spokesperson Emily Mir.

"Halliburton is making adjustments to its workforce in North America based on current business conditions and has communicated with our employees. Halliburton will continue to monitor the business environment and will adjust the size of our workforce to align with current business demands as needed. We are committed to ensuring that our separated employees are treated with dignity and respect," Mir said in an emailed statement.


The additional information around management-focused job cuts came to light only hours after the company also confirmed that it would be cutting worker jobs in North Dakota, according to a report in the Williston Herald.

As of press time, Halliburton's stock was trading at $37.41 per share. As of July, Halliburton employed 8,000 local full-time employees, according to Houston Business Journal research, making it the sixth-largest energy employer in Houston.

Halliburton last revealed job cut details in its second-quarter earnings report. In its filing with the U.S. Securities and Exchange Commission, the company said it "initiated a companywide reduction in workforce by approximately 16 percent during the first half of 2015." As of Dec. 31, 2014, Halliburton's global workforce stood at 80,000.


Source: Houston Business Journal
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Jim Cramer names the company he thinks is the 'biggest problem in the world'

9/23/2015

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On Monday's episode of CNBC's Squawk on the Street, Jim Cramer called Brazilian oil company Petrobras "the biggest problem in the world."

"I remember Russia," Cramer told his colleague David Faber. "I didn't think Russia could have an impact... next thing you know I was on TV talking about Russia and I felt very ill-equipped.

"I don't want to feel ill-equipped talking about Petrobras this time. This is the number one problem in the world right because it has so much debt, Brazil the 8th largest economy, and people aren't talking about it."

Petrobras, which is half-owned by the Brazilian state, has seen its share price fall almost 40% year to date. On top of that, Cramer pointed out, it's the most debt laden company in the world and the company's 10-year bonds are trading with a 10.5% yield. Cramer called that "unsustainable."



Read more here.


Source: AOL.com

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New Houston oil company buys Permian Basin assets from W&T

9/1/2015

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Houston-based W&T Offshore Inc. (NYSE: WTI) has agreed to sell assets in the Permian Basin to a newly formed Houston-based oil and gas company for $376.1 million.

Ajax Resources LLC, backed by affiliates of New York-based Kelso & Co., bought W&T's 25,800-acre property, known as Yellow Rose. The property includes 200 vertical and horizontal drilled and producing wells and produced approximately 3,000 barrels of oil equivalent in July.




Tracy Krohn, CEO and chairman of W&T, said the proceeds of the deal will go toward paying off the company's outstanding balance under its secured revolving credit facility and provide liquidity for future transactions.



"We are pleased to be monetizing our highly valued Permian Basin acreage. This sale will allow us to strengthen our balance sheet and improve our financial flexibility to pursue the acquisition of Gulf of Mexico assets while valuations are favorable," Krohn said in a statement.


W&T will retain a 1 to 4 percent sliding scale overriding royalty interest in the field.

The company relocated its headquarters to Houston shortly after Hurricane Katrina struck its former headquarters of New Orleans in 2005. W&T has most of its operations offshore in the Gulf of Mexico and onshore in the Permian Basin of West Texas.

Source: bizjournals.com

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The Truth About Gasoline Prices

8/28/2015

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Author: William Edwards

In a recent post Marita Noon posed the question "Oil’s Down, Gasoline Isn’t. What’s Up?" My first inclination was to answer her question in the "comments" sections. Then I realized that the question has enough widespread interest to justify presenting the answer in a wider post rather than just in a comment. Here is my answer to her question. Refiner's profits are up.

We deal with a host of misconceptions on a daily basis. The subject of gasoline prices is no exception. It is commonly believed, almost to the point of universal acceptance, that the price of gasoline at the pump is a direct function of either supply or demand or refiners' cost. It can be shown that, in reality, it is neither. I shall provide proof thereof.

The simple, undeniable fact is that the price of gasoline is, basically, whatever the refiner and the retailer can impose upon the public. Neither cost, availability, nor reason dictate that price. If threats of shortage, or impending hurricanes, or wars in the Middle East or assassinations of dictators allows the seller to convince the public that the price must go up, up it will go. And the public, referred to by our Oilpro associate Paul Jackson as "sheeple", will throng to the pumps to pay the inflated price. Further, when the esteemed CEO's of our major oil companies are called upon by Congress to explain the high prices, they will point to "the market" as the determinant of price, thereby shunning any responsibility for the prices that they, themselves, approve for the company's sales.

As prima facie evidence that my assertions are valid, I present the following chart covering the past dozen years. This chart displays the difference between the price of domestic crude, expressed as WTI, and the wholesale price of gasoline in the US. This differential is commonly referred to as the "refiner's margin". By utilizing margin rather than price I eliminate any impact of rising and falling crude prices.

This refiner's margin embodies two main elements -- operating cost and profit. For practical purposes, the operating cost element can be considered to be essentially constant since the cost of the raw material, crude oil, has already been deducted. Quantitatively this operating cost is on the order of 10-15¢/gal, shown as a solid horizontal line on the chart. The difference between this 15¢ and the value represented by the line, the wholesale margin, is the refiner's profit.


























Two facts are immediately obvious. 1) No constant relationship, or even a pattern, exists between the refiner's cost and his selling price. It appears to be random. Some of the spikes are identifiable, such as hurricane timing, but some are essentially random in nature. 2) The refining profit portion of the margin appears to be dramatically excessive for long periods of time. If a 10-20¢/gal margin is a reasonable level, how can the industry justify profit levels of 50-75¢/gal which occurred numerous times for months on end? I suspect that if a CEO appeared before a congressional committee and the questioner knew enough to ask incisive and probing questions, the CEO would end up with the proverbial egg on his face.

The end of the line on the right hand side of the chart represents today's numbers. Refiners have recently been charging prices that result in margins of 60-70¢/gal, which produces profits of 45-60¢/gal -- pure profit. That number is more than $20/B, or half of some producers' total selling price for their production. Does something seem amiss?

This extraordinary refiners profit is the answer to Marita's question of "What's up?" Refiner's profit is up. Costs aren't up, but profits are up.

I expect some blowback to my simple explanation. I only request that any dissenting responder provide data, as I have done, as substantiation of your position. You might provide, in addition, your explanation for the dramatic margins that the data display.


Source: OilPro.com

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Oil’s Down, Gasoline Isn’t. What’s Up?

8/28/2015

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A little more than a year ago, oil prices were above $100 a barrel. The national average for gasoline was in the $3.50 range. In late spring, oil was $60ish and the national average for gas was around $2.70. The price of a barrel of oil has plunged to $40 and below—yet, prices at the pump are just slightly less than they were when oil was almost double what it is today.

Oil and gasoline prices usually travel up or down in sync. But a few weeks ago the trend lines crossed and oil continued the sharp decline while gasoline has stayed steady—even increasing.

Oil’s down, gasoline isn’t. Consumers are wondering: “What’s up?”

Even Congress is grilling refiners over the disparity.

While, like most markets, the answer is complicated, there are some simple responses that even Congress should be able to understand. The short explanation is “refineries”—but there’s more to that and some other components, too.

Within the U.S. exists approximately 20 percent of the world’s refining capacity. Fuel News explains that “on a perfect day,” these domestic facilities could process more than 18 million barrels of crude oil. But due, in large part, to an anti-fossil fuel attitude, it is virtually impossible to get a new refinery permitted in America. Most refineries today are old—the newest major one was completed in 1977. Most are at least 40 years old and some are more than 100. Despite signs of aging, refining capacity has continued to grow. Instead of producing at 70 percent capacity, as they were as little as a decade ago, most now run at 90 percent. They’ve become Rube Goldberg contraptions that have been modified, added on to, and upgraded. The system is strained.

To keep operating, these mature refineries need regular maintenance—usually done on the shoulders of the busy driving seasons and when systems need to be reconfigured for the different winter and summer blends. Even then, things break. Sometimes a quick repair can keep it up and running until the scheduled maintenance—known as “turnaround.” Sometimes, not. Fixing the equipment failures on the aging facilities can take weeks.

This year, several unexpected maintenance issues happened in the spring. Other refineries worked overtime to make up the shortage. That, plus low crude prices, means that many refiners didn’t shutdown for the usual spring turnaround. Fuel News notes, potential profit encouraged refiners to “get while the getting’s good.”

This pedal-to-the-metal approach is catching up with the sagging systems. On August 8, BP’s Whiting, IN, refinery, the largest supplier of gasoline in the Midwest, faced an unplanned shutdown due to a leak and possible fire hazard in its Pipestill 12 distillation unit—which processes about 40 percent of its 413,000 barrel per day capacity.

The closure of the largest of Whiting’s three units caused an immediate jump in gasoline prices in the Midwest. Stockpiles were drawn down to fill demand during summer’s peak driving season. Gasoline has been moved—via pipeline, truck, and train—from other parts of the country to balance out supply. So, while the biggest price increase was in states like Minnesota, Michigan, and Illinois, prices raised nationwide beginning on August 11.

Meanwhile, because the Whiting plant wasn’t sucking up crude oil, its supplies grew and drove crude prices down further—hitting a six-year low. The Financial Times reports: “An outage at Whiting’s main crude distillation unit could add almost 1m [million] barrels to Cushing [The OK oil trading and storage center] every four days as long as it is out.”

Making matters worse, another Midwest refinery, Marathon’s Robinson, IL, 212,000 barrels per day facility is down for repairs that are expected to take two months.

Others smaller outages include Philadelphia Energy Solutions and the Coffeyville Resources’ refinery in Kansas. BloombergBusiness states: “As many as seven other Midwest refineries could shut units for extended time this fall.” Though, other reports indicate that some of the planned maintenance may be put off due to profit margins that are at a seven-year high.

Adding to the price increases due to refinery issues, are two other factors—both having to do with the calendar.

First, we are almost to Labor Day, which is considered the end of the summer driving season. It is when families make that one last trip to the lake or to visit grandma—which always causes a jump in demand that tightens supplies. This year, with two big refineries down, the usual spike could well be exacerbated.

The other is hurricane season. While we are just past its peak, we’ve only had one hurricane so far: Hurricane Danny—which last week was barreling toward the Northern Caribbean islands, with potential to hit the refinery-rich Gulf Coast. On Friday August 21, it moved from Tropical Storm Danny to Category 3 Hurricane status. It has since weakened, but its presence caused risk and supply concerns.

High summer-driving demands and unscheduled refinery repairs have combined to reduce supply of gasoline, and raise the price, thus the need for crude oil—especially in the Midwest—is down. Crude oil inventories at the Cushing hub continue to increase and add to the current oversupply and slide in oil prices.

While there’s some other contributing factors, the current mix of supply and demand explains: “what’s up?” The lack of new refineries punishes the whole system. Gasoline prices are up—hurting consumers. Crude prices are down—hurting producers.

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.


Source: OilPro.com
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Subsea 7 Win $500M Contract with BP

8/10/2015

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Subsea 7 announced the award of a contract with a value of approximately $500 million by BP, and partner DEA, for the development of the Taurus and Libra subsea fields offshore Alexandria, Egypt.

The contract is the first phase of Egypt’s West Nile Delta project where field development will be at depths of approximately 800 metres.

According to Subsea 7, the contract scope includes the engineering, procurement, installation and pre-commissioning of subsea infrastructure required to develop the hydrocarbon resources from nine wells including 75 kilometres of umbilicals and 100 kilometres of pipeline.

The company said that engineering and project management work will start immediately and will be undertaken at Subsea 7’s Global Projects Centre in London. Fabrication of the subsea structures and spools will be carried out at the Petrojet Maadia yard near Alexandria.

Furthermore, offshore installation is scheduled to start in the second half of 2016 using the Subsea 7 pipelay vessel, Seven Borealis, and heavy construction vessel, Seven Arctic.

Øeyvind Mikaelsen, Executive Vice President Southern Hemisphere and Global Projects said: “This large contract awarded by BP for the first phase of the West Nile Delta field development recognises the value we bring to our clients through early engagement with them to engineer, design and deliver cost-effective solutions for complex field developments. We look forward to expanding our presence in Egypt and building on our long, successful and collaborative relationship with BP.”

This follows the recent news of Subsea 7 cost cutting measures of $550 million, including staff redundancies and a reduction of vessels within there fleet

Source: www.offshoreenergytoday.com


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The First Post-Sanctions Iran Oil Contract Has Been Signed

8/10/2015

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Eni's chemicals subsidiary Versalis has become the first European company to ink a contract with Iran after the July 14 deal between the P5+1 and Iran, according to an official report issued by National Iranian Petrochemical Company (NIPC) cited by mehrnews.com.

The Technology Transfer Deal



The Technology Transfer Contract comes after Versalis, Italy's largest chemical company by production volumes, sales and headcount, agreed to join a trilateral contract of Technology Transfer (TTC), together with two commissioning agencies - Italy's Tecnimont and an Iranian firm- with Iran's NIPC.

Versalis says on its website that it manages the production and marketing of an extensive portfolio of petrochemical products and is a leading manufacturer of intermediates, polyethylene, styrene and elastomers.

The company also says it recently repositioned its business with a greater focus on a market-oriented product portfolio, the strengthening of research and licensing and the expansion of its global presence by focusing more on the development and optimization of business, in particular elastomers, with a portfolio that will be enhanced by an integrated offer with products from renewable sources.

The Italians Meet With The Iranians


Eni CEO Claudio Descalzi, Italian Foreign Minister Paolo Gentiloni, and Italy's Minister of Economic Development Federica Guidi were among the hundreds of representatives who visited to Tehran last week. The representatives held meetings with two ministers of Hassan Rouhani's cabinet, mehrnews.com reports.

The Italian major had a $550 million agreement to help the Islamic Republic develop its Darkhovin oil field, anticipated to produce 160,000 bpd, prior to halting operations in 2010 due to sanctions pressure.

No Interest Expressed By American Companies Yet...


Iranian Oil Minister Bijan Zanganeh said last week that new contracts for potential IOCs will be formally outlined in December during an investment conference in London. Per the new terms, the National Iranian Oil Company will establish joint ventures with foreign companies, which will be compensated with a portion of the output.

Over the weekend, Zanganeh said that "all international" oil companies will be able to submit bids for projects in the country's oil sector. He said, however, that no interest has yet been expressed by American firms: "We have received no requests from any American company so far." US firms are prohibited from bidding on participating in Iran's oil sector until sanctions are lifted, which could be sometime this December or early next year.


Source: OilPro.com
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What Is Procurement?

8/10/2015

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Procurement, in the simplest sense, involves a series of activities and processes that are necessary for an organization to acquire necessary products or services from the best suppliers at the best price. Such products or services that are procured include raw materials, officer equipment, services, and supplies, furniture and facilities, technical equipment and support, telecommunications, printed collateral, contingent worker recruitment, testing and training, and travel-related services, among many others.

Part of an Organization’s Corporate Strategy

Procurement is nuanced and intertwined with several core business functions, and as such, it should be considered a core component of a company’s corporate strategy. For example, if a company’s identity is based on being environmentally conscious, then the procurement specialist’s strategy must focus on engaging green suppliers. If a company has specific goals, it needs to procure the right workers to help it achieve them.

Why It’s so Important in Business


Because an organization can end up spending well over half of its revenue on purchasing goods and services, proper procurement management is vital. Even the slightest decrease in purchasing costs can have a significantly direct impact on profits, while a lack of strategic decisions can sink an otherwise financially healthy company. It can make the difference between success and failure. High purchasing costs or a high degree of wastage in the supply chain can affect an organization’s bottom line and reputation.

The Need for Visibility


You can’t control what you can’t see, which is why visibility is vital in the procurement process. Organizations need full visibility into their internal processes and spending. The most effective way to achieve this is with spend segmentation. By segmenting spend and suppliers by specific categories, organizations can better understand exactly where their money is going and why, and how to reduce costs. 

Steps in the Process


Having a systematic process allows organizations to be strategic when procuring goods and services from external vendors. It helps them manage supplier relationships, determine which vendor to buy from to receive the lowest cost and best quality, determine what specifications and quantities are needed, streamline the shipping and delivery timeframes and methods, review and accept the items purchased, approve payments, review supplier performance against contract, and identify and resolve performance issues. In short, having an effective management process can allow firms to increase efficiencies and cut costs when purchasing from vendors.

This process can include numerous steps, which include the following:
  • Identifying requirements
  • Authorizing and approving a purchase request
  • Identifying suppliers
  • Making inquiries
  • Receiving quotations
  • Negotiating terms
  • Selecting a vendor
  • Creating a purchase order and goods receipt
  • Managing shipping
  • Receiving invoices
  • Making payment

Procurement versus Purchasing


Many people use the two terms interchangeably, but there are differences. Purchasing consists of the last explicitly transactional steps found at the end of the overall procurement process. Procuring deals with sourcing, negotiation, and strategic selection, which must occur before the purchasing of any products or services can be had.

How Technology Can Help


With the help of the right software, organizations can streamline their supplier selection and rate management. They can create new job postings in just a few clicks that give bidding suppliers complete job requirements, which include rate structures, certifications, and qualifications. They can manage relationships, monitor performance, and process payments. By optimizing the process with a management solution, companies can protect their profit margins and significantly cut costs.

A Vital Process


Procuring is about more than just the purchase of goods, services, or works from external sources. It requires strategic planning in order for organizations to acquire these things at the best possible cost, which meet their needs in quality, quantity, location, and time. It is a vital part of any company’s overall business strategy.

Source: hcmworks.com

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When It Comes To Oil Prices, BP Has Been Dead On

7/29/2015

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So far, BP CEO Bob Dudley has been right. In the company's 1Q15 conference call earlier this year, he said he expected oil prices to remain "lower for longer." They have.

"As you know, we have held the view for some time that oil prices will be lower for longer, but whatever the old oil price charts look like we are clear on what we need to do," Dudley said this morning.

CFO Brian Gilvary added, "Although demand has been stronger, OPEC production is running higher than the 2014 average and production in the United States has remained resilient. The recent agreement to lift certain Iranian sanctions has also raised the prospect of additional production coming onto the market."

In short, BP's outlook can be encapsulated by the phrase "sober realism." The market is what it is. BP has accepted this reality. What follows is how it has done so, and how it plans to continue doing so.

1. More Headcount Reductions

BP sees its restructuring charges related to layoffs increasing to approximately $1.5 billion by the end of 2015- up from $1 billion estimated in December.

BP CEO Bob Dudley said on Tuesday morning's call, "We will continue to identify more opportunities for simplification and efficiency,” and the increase in restructuring charges “reflects a faster pace” of cost-cutting across the company.

He said, “There are further gains [to be made], we’re sort of well into restructuring costs in the upstream and plan to continue later this year...Certainly it’ll be in some of our big centers around the world — Houston, some more in Aberdeen.”
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BP CEO Bob Dudley
CFO Gilvary noted that BP's restructuring efforts on the corporate side commenced in 2013. Since then, the company has seen significant headcount reductions in both contractors and employees. He said, "Since 2013 the Upstream staff headcount is down 8.0% while other corporate staff is down 37%." Additionally, "Expatriate employee numbers are at the lowest levels since 2011."

Gilvary reiterated Dudley's previous comments during the Q&A portion of the call, saying that further headcount reductions could be expected before the end of the year. "...We're seeing significant headcount reductions both in terms of our own employees but also contractors where we run a bigger contractor work...You're also seeing significant headcount reductions both in Upstream and Downstream as we progress through the year and I think you'll see more of that before we get to the end of the year."

2. Capex Cut For Second Time In 2015

2Q15 Capex was $4.5 billion, bringing the total for 1H15 to $8.9 billion. BP said Tuesday that it has cut its 2015 Capex for the second time- to below $20 billion (from $22.9 billion last year). BP also said it has agreed on $7.4 billion of divestments towards the current $10 billion divestment program.

BP spent $9.1 billion in 1H15 and has completed the sale of $7.4 billion in assets, which is pursuant to its plan to divest $10 billion in assets by the end of 2015.

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On Tuesday morning's conference call, CFO Brian Gilvary said he anticipated oil prices (which dropped Tuesday to their lowest level since February) to remain soft in the medium term due to the ongoing global supply glut. Dudley reiterated that BP has “held the view for a long time that oil prices will be lower for longer,” but he added that project costs are anticipated to decline 20% to 30%.

BP says its simplification and efficiency programs to sustainably reduce non-safety-critical cash costs are delivering results throughout the company. Total cash costs thus far this year are estimated to be approximately $1.7 billion lower than the same period last year. In 2Q15, BP took a further $270 million non-operating restructuring charge, bringing the total over the past three quarters to $920 million. It now expects restructuring charges to total near to $1.5 billion by end-2015.

Gilvary, commented: “We can see clear progress in our capital program and from our work to reset and reduce cash costs. Our focus remains on rebalancing the company’s sources and uses of cash in a lower price environment.”

He added that amid the current price environment, BP is "exercising strict capital discipline across the Upstream. We're testing the resilience with project economics the low price environment and progressing only the highest quality options in the portfolio. We're maintaining optionality in remaining resources and recycling projects where we see potential for optimization."

3. What About Iran?


Dudley said Tuesday that BP is plans to pursue upstream opportunities in Iran following the easing of sanctions. However, he said, it is not yet clear what Tehran's intentions are for its new oil contracts (which are tentatively slated to be introduced in London later this year).

Speaking to reporters in London, Dudley said BP's upstream involvement in Iran will largely depend on when and how sanctions are rescinded. He said, "It is not clear to us what their plans are (on contracts)."

4. Looking Ahead: "Value Over Volume"


Dudley and Gilvary emphasized on Tuesday morning's conference call that BP is committed to rebalancing the company's financial framework over a ~2 year period.
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BP said it is refreshing its model for longer-term shareholder value, focusing on value over volume, disciplined investment focused on its core projects, and getting more from existing assets through enhanced execution in the base.

"We'll be getting more activity through less capex going forward...We have a framework to achieve growth through a lower capital," Dudley noted during the Q&A portion of the call.

5. 2Q15 Snapshot

BP's underlying replacement cost profit for 2Q15 was $1.3 billion, compared with $2.6 billion for the previous quarter and $3.6 billion for 2Q14. The result reflected the impact of continued low oil and gas prices, a reduced contribution from Rosneft, and one-off charges arising from circumstances in Libya, but also continuing strong earnings from the major's downstream businesses and lower cash costs throughout the company.

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While BP's upstream business continued to be impacted by low oil prices, its downstream division saw gains in 2Q. Its downstream unit reported $1.9 billion in profit versus $700 million last year, as refining margins rose on cheaper feed stock.

Dudley commented, “The external environment remains challenging, but BP moved quickly in response and we continue to do so. Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the Group and we continue with capital discipline and divestments.”




Source: OilPro.com
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