BP Outlines Business Plans – Analyst Blog

After saving nearly $4 billion in costs last year, UK oil super major BP Plc. (BP) is aiming for a $3 billion improvement in the company’s pre-tax profits in the next couple of years. The company also anticipates an average production growth of 1% to 2% per year to 2015. 

 

To accomplish these targets, the company is setting out various plans for the Downstream and Upstream segments. Besides that BP is also focused on low-carbon businesses, including US onshore wind power, biofuels and solar power. The company invested approximately $1.3 billion for these businesses in the last year and a cumulative amount of more than $4 billion since 2006.

 

In Downstream, BP is eyeing at over $2 billion improvement in profitability in the next two to three years based on its business portfolio, featuring on average larger and more advantaged refineries than its competitors.

 

In Upstream, the company’s medium-term growth focused on three areas of deep expertise: deep-water production, global gas including unconventional gas, and managing some of the world’s giant oilfields. In each area, BP had made significant advances last year.

 

These plans coincide with BP’s recent deal for the expansion of its shale-gas operations in the U.S., where the company is involved in a 50/50 joint venture in southeastern Texas with privately held Lewis Energy. BP will acquire a 50% stake of Lewis in 80,000 acres of the Eagle Ford Shale play.

 

This joint venture is another example of how the major integrateds are involved in shale gas development. While we are all aware of the ExxonMobil (XOM) − XTO pending merger, the Eagle Ford development program is not a one-off item for BP. BP had purchased stakes in the Fayetteville and Woodford shale plays from Chesapeake Energy (CHK) in 2008.

 

With a strong reserve replacement profile and management’s determination to drive down costs, we believe that BP is well positioned for growth. We think that the company offers the best combination of near-term growth, operational momentum, a sector-leading dividend yield and balance sheet strength.