U.S. court ensures BP has worst possible start to era of cheap oil: Game over. BP can take one of its beefs with U.S. justice little further. The Supreme Court has declined to rule whether claimants must prove their businesses were damaged by the 2010 Macondo oil spill to get compensation. You can buy desk calendars with a joke per day satirising the sharpness of lawyers (Sample: what’s the difference between a lawyer and a vulture? The lawyer gets air miles). BP Boss Bob Dudley should have thought twice before signing. The company hopes a second line of defence, relating to claimant perjury, will reduce the damage. But a provision of $9.7 billion for this strand of compensation looks low. BP threw off free cash of $8 billion in the 12 months to September according to S&P CIQ. Extra billions in compo spread over years would be bearable, normally. But the oil price is now $14-$19 per barrel below the $80-$85 specified in October by finance Director Brian Gilvary as comfortable. In entering a period of low prices, BP has started from the wrong place.
Announce Hundreds Of Job Cuts Later This Week; Oil's Fall Speeds Up Headcount Reduction Plan At an investor conference on Wednesday, BP will announce that hundreds of jobs will be cut at its offices in London, Sunbury and Aberdeen, in support staff in areas such as its legal, procurement and communications divisions.
The company is targeting its non-operations staff, including back-office employees, who have thus far been kept on in the wake of corporate restructuring over the last four years.
British major BP is speeding up previously-made plans to reduce its headcount and freeze key projects, reflecting how IOCs are seeking to control costs in the wake of the lower oil price.
BP CEO Bob Dudley announced 18 months ago that the major would be conducting an evaluation of all its E&P activities. He said in March 2014 that 60 different projects for simplifying and streamlining the business were being assessed.
enter image description hereBP CEO Bob Dudley
BP said in a statement, "Oil is concentrating minds on making the organization more efficient and the right size for the smaller portfolio we have now."
Oil closed at its lowest level if five years last week, as the fallout of OPEC's November 27 decision to maintain its 30 M/bd output quota for 1H15 continues to produce ripple effects in the global market.
BP is currently a third smaller than it was four years ago, the company said. It has been divesting parts of its portfolio during this time, and plans a total of $10bn in asset disposals by 2016 per its restructuring plan.
Currently, there are 84,000 BP employees worldwide. 15,000 of this number are located in the UK.
Many of the jobs that will likely be lost are not needed now due to the fact that BP has 50% fewer offshore fields, 30% fewer wells and 50% fewer pipelines, following its selling off of more than $40 billion in assets to pay for the cost of the 2010 Macondo incident.
The company also confronts risks due to its 19.75% stake in Russia's Rosneft, which has been hit recently by Western sanctions and the collapse of the ruble over the past month.
The Financial Times cited UBS analysts who forecast that oil will trade at approximately $70/barrel in 2015. They project that this will decrease earnings by roughly 33% for Europe's integrated O&G firms. They also said that capex is will likely suffer a 10% hit.
BP said, however, that the lower oil price helps to cut inflation, which will make goods in the company's supply chain less expensive. CFO Brian Gilvary told the Sunday Times, "We have got flexibility in our programme to trim into next year if that's what we need in a new world of oil at $70 or $60, or whatever the number is."
He continued, "headcounts are coming down across all our activities in upstream, downstream and in the corporate centers.”
The longer oil stays at this price the higher and longer the next oil spike. Interesting times, with US shale companies having to decide whether to sanction future projects which at todays prices will be losing them money.
add a few more months on to your prediction for $80 and you're absolutely right. Long term oil will bounce and bounce well. There will always be someone somewhere predicting a silly low price, and then most of the time there is a bounce and they disappear.
BG look interesting to me, but not sure how much upside there is over here at BP. Any views?
oil still on drift ,as I see it oil consumption will be higher at $65 than it would have been @ $100 ,from all that I,ve read the over supply was not that much ,and oil being a consumable commodity a constant new supply is always needed ,add that to the fact that some cut backs in production will occur as a result of the price drop .imo oil will find a bottom over the next couple of months and also in my opinion ,that floor will be above the very pessimistic views ,I would say not much below $60 (even it may not breach$60) I see oil above$80 within 3 months .
oil still on the slide ,the way I see it consumption will be higher @ $65 than it would have been @$100 ,at some point within the next couple of months oil will find a floor ,from reports I,ve read the over supply was not that great ,oil is a consumable commodity so a constant supply is essential ,imo oil will not go much below $60 (only 50%chance of that happening) from there it should rise to a higher point than it would have been had the drop not taken place ,as consumption will have increased ,and supply diminished .
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