After a year of selling assets and maneuvering through litigation threats, BP plans to grow by focusing on deepwater oil and gas exploration, where it expects increase its rig fleet by 40 percent by 2014, company executives told investors Monday.
“We have a bias to deepwater – it is where we believe, we and few others can manage the risk and reward, and develop the capability and technology that will be required,” said Andy Hopwood, BP’s executive vice president of strategy, in a meeting outside of London that was webcast.
BP’s deepwater strategy will focus on developing Gulf of Mexico and Angola assets: in the Gulf, only 20 percent of its well resources have been produced, indicating that these sites will continue to part of BP’s portfolio for years to come. BP plans to have eight new wells completed in the Gulf by the end of 2013, a sharp increase from zero new wells in 2011 and two additional wells in 2012.
The company also intends to aggressively explore for new opportunities, in Brazil and other areas.
“The most value leveraging part of our business is in accessing the acreage early and adding new oil and gas resources through the exploration drill bit – quite simply, much like deepwater, exploration is in our DNA,” Hopwood said.
BP’s portfolio of planned projects include several planned projects worth more than $10 billion, five of which BP expects to be in production by 2014. Bernard Looney, BP’s vice president for developments, said that these projects are expected to generate much higher profit than smaller sites, helping BP to reach its planned cash targets.
BP’s sale of $37 billion of its assets has resulted in a 10 percent decrease in its oil reserves but, at the same time, the company has actually grown its non-proved resources, Hopwood said, explaining that the company is not looking to acquire more already-discovered resources.
“We feel confident that we have enough of the right resources, refreshed, and refocused to sustain growth in value to the end of this decade and beyond,” Hopwood said. “Buying into discovered resources is less likely going forward unless the opportunity and access cost is very advantageous for us.”
BP currently has a 45 billion barrel resource base, which includes 13 billion proved reserves and 32 billion of non-proved resources. In the Gulf of Mexico, BP held on to its highest-producing production platforms: Thunderhorse, Atlantis, Mad Dog and Na Kika, all of which still have about 80 percent of their oil resources remaining.
It instead shed its smaller Gulf assets that “were not going to attract the appropriate people or capital resources”, Hopwood explained. On the chopping block were several assets where BP had a smaller interest – Marlin, Horn Mountain, Holstein, Ram Powell and Diana Hoover, which were sold in a deal that was final last Friday for $5.5 billion.
For its North America onshore business, BP has also slimmed down its midstream investments, focusing on exploration for unconventional fuels. The company is targeting the Utica and Eagle Ford shales, which Hopwood said will allow BP to focus on its competitive strengths in exploration and well development.
BP’s long-awaited sale of its Texas City refinery at the end of this year marked both the end of a tragic chapter for the company refinery and a strategy shift to use its three remaining Northern refineries as a way to get Canadian oil sands crude to market, where BP plans to increase its investment.