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BP Cuts Spending By Quarter, Lowers US Shale Output

BPX output will drop by around 70,000 barrels of oil equivalent per day (boepd) in 2020, around 14% lower than its 2019 output of 499,000 boepd.

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BP cut its 2020 spending plan by 25% and will reduce output from its U.S. shale oil and gas business in the face of the collapse in oil prices triggered by the corononavirus outbreak, it said on Wednesday.

"This may be the most brutal environment for oil and gas businesses in decades," CEO Bernard Looney said in a statement.

The London-based company said it plans to spend $12 billion this year, joining its peers that have announced cuts of around 20% in annual spending on average. BP had previously said its 2020 spending would be "at the lower end" of a $15 to $17 billion range.

That will include a $1 billion reduction in investment in its shale business, known as BPX, where production can be switched on and off relatively quickly, representing a 50% drop from 2019 investment levels.

BP became a leading shale producer following the $10.5 billion acquisition of BHP's onshore U.S. assets in late 2018.

BPX output will drop by around 70,000 barrels of oil equivalent per day (boepd) in 2020, around 14% lower than its 2019 output of 499,000 boepd.

BP's overall oil and gas production is also expected to fall.

BP will also reduce capital spending on its refining and marketing, or downstream, business by $1 billion.

BP shares were down 1.3% by 0900 GMT.

Oil prices dropped by 65% in the first quarter of the year as a result of a sharp drop in demand following movement restrictions on more than 3 billion people around the world to limit the spread of the coronavirus.

A price war between top oil producers Saudi Arabia and Russia further weakened the sector as the two nations increase supplies to try to win market share.

BP said it plans to introduce $2.5 billion of cost savings by the end of 2021 through the digitalisation and integration of its businesses. Last week Looney said BP would not cut jobs in the next three months.

The company's $15 billion asset disposal programme targeted by mid-2021 remains on track, but completion of deals already announced, including the $5.6 billion sale of BP's Alaska assets to Hilcorp, may face delays, it said.

For the first quarter of the year, BP expects to take an impairment charge of $1 billion, while oil and gas output is expected to decline form the previous quarter by a range of 2.55-2.6 million boepd.

(Reuters)


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