BP has said it needs oil to be selling for $60 a barrel by the end of the year for it to break even. That is higher than its previous target of $50 to $55 which is where prices have been recently. For all of last year they were at an average that was the lowest in 12 years at around $44.
The energy giant’s annual earnings fell for a second consecutive year, even as it has been investing more to find fresh fields.
CMC Markets Analyst Michael Hewson explained: “A lot of oil companies put an awful lot of capital expenditure based on oil prices around about $75, $80 dollars a barrel, we’ve been as low as $27 a barrel, and yes we have rebounded quite substantially off that, and they have cut back capex an awful lot, but it’s a very competitive market and there’s an awful lot of spare capacity still, I think, out there in the oil market and demand still remains fairly constrained.”
The glut of crude oil has kept a cap on prices.
BP’s number’s follow worse-than-expected results from Shell, Exxon Mobil. Chevron and Statoil.
Michael Hewson said: “Ultimately despite the rebound in oil prices, revenues are struggling to keep up.”
The British oil and gas company continues to cut costs but has reversed its policy of selling assets and said it expects production in 2017 to be higher than last year.
BP has been on a spending spree in recent months, concluding a string of deals, including in Eni’s giant Zohr offshore gas field in Egypt, contracts in Abu Dhabi and Azerbaijan, a stake in exploration areas off the coast of Mauritania and Senegal from Kosmos and the purchase of service stations in Australia.
The burst in activity marks a return to growth for the company whose deadly 2010 Deepwater Horizon rig explosion in the Gulf of Mexico forced it to sell assets worth billions of dollars. But this growth also means higher costs.
BP’s bill to compensate for damages caused by the Gulf of Mexico explosion and ensuing oil spill have risen to $62.6 billion (58.6 billion euros).
The company’s shares finished down 3.5 percent on Tuesday.