BP expects its US onshore oil and gas output to stay flat in the coming years but said the business should generate more free cash flow regardless.
The company revealed in its 2020 financial results today that its onshore oil and gas business in the US lower 48 states — BPX Energy — produced 315,000 b/d of oil equivalent (boe/d) in October-December, down from 365,000 boe/d in the previous quarter and 502,000 boe/d a year earlier. But the operational figures mask an improving financial outlook for the business, according to chief executive Bernard Looney.
"BPX is going really well. Cost synergies are ahead of plan. I think we said $350mn had been delivered early and we are upgrading that target to $400mn," he said. "The rocks look really, really good, better than we had hoped."
Looney stressed that BP is adopting a value-over-volume approach in the US onshore sector. "I have been looking at some of the profiles for that business over the coming years. We are not focused on production, we are focused on growing free cash flow and that is what you should expect from us," he said. "The numbers that I looked at… showed more of a flat production over the coming years, but a growing free cash flow profile."
Looney said there are "thousands of locations" in the BPX portfolio with returns that are "well in excess of 20pc" at prevailing prices.
Despite the flat production outlook, BP said it will increase the average number of rigs it operates this year. "We have gone from one rig to five rigs and we will be probably having about eight rigs in 2021, they will be spread across the basins," chief financial officer Murray Auchincloss said, adding that BPX's current focus is on its liquids-rich acreage.
"Given the current prices, we will be focused on the oil side as opposed to the gas side this year," he said. "We have four basins — two gas, two oil/liquid — so we can move back and forth between those as we need."
