7th Feb 2006 07:04
BP PLC07 February 2006 press release February 7, 2006 BP REPLACES RESERVES FOR 13th YEAR IN A ROW BP has replaced its annual production for the 13th consecutive year, chiefexecutive Lord Browne announced today. He said the company had replenished reserves by 100 per cent on a UK reportingbasis and 95 per cent under SEC rules which take account of year-end prices,giving it a proven reserve base of over 18 billion barrels of oil and gasequivalent at end-2005. On top of proven reserves, BP also added nearly 2 billion new barrels to itsnon-proven resource base last year, taking it to a total of 41 billion barrels,of which the company expects to convert some 11 billion barrels into provenreserves by 2010. Previewing a strategy update to the financial community, Browne said BP hadincreased oil and gas production by an average of 4.4 per cent a year since 2000- the fastest growth rate of the supermajors. Assuming a $40 oil price, output for this year is expected to be between 4.1million and 4.2 million barrels a day. With more than 20 new projects due onstream in the next three years, and assuming the same level of oil price, theannual rate of increase should continue at some 4 per cent through to 2010, hesaid. "Based on our proven track record, we should add an extra 10 billion barrels toour resource base from our existing exploration portfolio. It is the quality andmagnitude of this resource that underpins our expectation of continued stronggrowth in output beyond 2010." Dividends and share buybacks combined totalled some $19 billion for 2005 andBrowne said BP's dividend policy remained unchanged, as did its target to returnto shareholders all free cash flows in excess of investment and dividend needs."Between 2003 and 2005 we distributed a total of $40 billion to ourshareholders, some $19 billion in dividends and $21 billion in share buybacks. "Our estimates, looking forward, have to be based on assumptions about the oilprice, refining margins and so on. But under the same set of conditions as weactually experienced between 2003 and 2005, with the Brent oil price at about$41 a barrel, the amount of expected future cash distribution between 2006 and2008 would be about $50 billion. At an oil price of $60 a barrel, this couldrise to around $65 billion." Browne said that for the past five years BP had reinvested at a proportionallyhigher level than its peers. From 2003 to 2005, the reinvestment rate was 65 percent of operating cash flow, compared with 54 per cent on average for the peergroup. Expected capital spend for this year is some $15 billion, rising to some $16billion in 2008. The upstream business expects to invest around $11 billion in2006, versus $10 billion last year. TNK-BP capex is expected to rise from $1.8billion to $2.5 billion. A planned doubling of refinery investment to $1.5 billion a year for the nextthree years would improve margins, operating flexibility and the reliability ofplant. The Texas City refinery is scheduled to re-start production this quarterafter a four-month shutdown. The adverse impact of the closure is estimated atbetween $600 million and $800 million for the first quarter of this year,depending on the actual start-up date and prevailing margins, but this willdiminish through the year as output rebuilds. Elsewhere in the downstream business new cost-efficiency programmes, including a10 per cent reduction in unit cash costs in marketing, are aimed at deliveringsavings of some $500 million by 2008. The Group's end-year gearing stood at the unusually low level of 17 per cent asa result of the $8.5 billion proceeds from the sale of Innovene but would returnto the target range of between 20 and 30 per cent. Browne said he envisaged divestments of around $3 billion a year on an ongoingbasis as BP continued to upgrade its portfolio. He said he expected the world economy to grow at around 3 per cent in 2006, thesame rate as last year, with global oil demand remaining robust. "OPEC's marketshare is likely to remain largely intact along with its ability to deliver itsprice objectives. The vulnerability to a significant supply disruption is alsoexpected to remain high. "This backdrop is why we believe there is good medium term support for prices toaverage above $40 a barrel - presuming, of course, that there is no sustainedmajor downturn in demand which could result from a deep and long globalslowdown." Browne said the near-term operating environment for the Group looked veryfavourable. "We have considerable momentum going forward and our strongincumbent resource and asset base underpins our distinctive growth prospects.Our focus is on translating this strong environment and growth into delivery ofcash which we intend to return to our shareholders." - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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