BP, Inc (NYSE:BP) will attempt to develop its deep portfolio of oil and gas projects to deliver 1-2% production growth beyond 2015. These and other plans and goals were outlined at the company’s annual strategy session in early March.
Exploration and Production
The company’s 1-2% growth in production through 2015 is predicated on $60 oil, and does not include any potential upside from its Iraq ventures. BP will make decisions on 24 major projects over the next two years to achieve this growth. If these are all approved the company will have 41 major projects start up before 2015, delivering 1 million barrels of production.
The company also plans to extend this growth beyond 2015 at this same rate. BP is powering this growth through investing extensively in deepwater exploration and development, and through an aggressive entry into onshore natural gas. For the second half of this decade passed 2015, BP is focused offshore in the Gulf of Mexico, Angola, Egypt and Libya.
One giant discovery for BP was the Tiber prospect in the Gulf of Mexico, which was drilled to the Lower Tertiary trend. This was BP’s second discovery here, after it hit a successful well at Kaskida. BP has a 62% working interest in the Tiber prospect, along with Petrobras (NYSE: PBR) with 20% and ConocoPhillips (NYSE: COP) with 18%.
BP has also built positions in several of the emerging shale plays in North America and will use those areas to power growth from 2015-2020. In the Fayetteville Shale, BP bought a 25% interest from Chesapeake Energy (NYSE:CHK) in 2008, and bought out Chesapeake Energy’s interests in the Woodford Shale as well. Last week BP signed a joint venture with a private company to develop the Eagle Ford Shale.
The company’s refining business, however, continues to struggle along with the rest of the industry and BP is looking only to breakeven this year in that business. Other major oil companies are either restructuring or exiting the refining business. Chevron Corp. (NYSE:CVX) recently announced the layoff of 2,000 employees to help cut costs in its downstream business. Royal Dutch Shell (NYSE:RDS.A, NYSE:RDS.B) is attempting to sell some of its non core refineries to concentrate on those that are more profitable.
BP has been one of the more aggressive energy companies in exploring and developing in the United States, and that focus is now paying off with low single digit production growth for the rest of this decade. (To learn more, see our Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
By Eric Fox
Eric J. Fox, is the founder of Brittain Capital Management, LLC., which manages the Alesia Fund, LP., a Value oriented long/short investment partnership. You can read more of his views on investments at his blog – Stock Market Prognosticator.