BP adjusts to the ‘new reality’ as oil group aims to cut investment by £4bn

BP is to cut investment for this year by a fifth or as much as £4bn as it adjusts to the “new reality” of lower oil prices, boss Bob Dudley said yesterday.

His stark message came as the group slumped to a £645m replacement cost loss for the fourth quarter.

BP recorded a £2.4bn hit including write-downs on assets in the North Sea and Angola and on the falling oil price.

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Its results came as oil and gas exploration firm BG Group – originally a spin-off from the privatisation of British Gas – also slashed capital expenditure plans for 2015, by £4bn-£4.7bn.

Brent crude has slumped by more than half since last summer to reach nearly 45 US dollars a barrel in January though it has since bounced back to about 55 US dollars.

Mr Dudley said: “We have now entered a new and challenging phase of low oil prices through the near and medium term.

“Our focus must now be on resetting BP: managing and rebalancing our capital programme and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations.”

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Annual replacement cost profit for 2014 was down 66 per cent to £5.37bn.

However, underlying figures were not as bad as expected, showing a 20 per cent fall to £1.49bn for the fourth quarter and a 10 per cent decline for 2014 to £8.08bn.

Shares climbed as much as 6 per cent on the results and the decision by BP to cut spending in line with rivals though some of the gain ebbed away later in the session.

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