BP abandons target to cut oil production

BP is preparing to drop a target to cut its oil and gas production by the end of the decade, as its boss works to close the valuation gap with rivals in the energy industry.
The FTSE 100 oil company had first introduced an ambitious goal to reduce its oil and gas output by 40 per cent by 2030, and to boost spending on renewables, in a major reset of its strategy set out in 2020 by Bernard Looney, the former chief executive who was forced to resign last year after failing to disclose the full extent of his personal relationships with colleagues.
The target was reduced in February last year, after a dramatic rebound in commodities prices, to a 25 per cent cut in production compared with 2019 levels, which would leave the company producing about two million barrels a day.
Murray Auchincloss, who became permanent chief executive at the start of this year, is planning to formally abandon the target in February, according to Reuters, when the group updates the market on its capital allocation strategy alongside full-year results.
A spokeswoman for BP, said: “As Murray said at the start of the year in our fourth-quarter results, the direction is the same — but we are going to deliver as a simpler, more focused, and higher value company.”
When asked in July whether the company would rethink its plans to cut oil and gas production, he said: “I’m not really focused on production volumes. I’m focused on cash and earnings, as I continue to tell the market that’s what counts.”
Auchincloss, 54, is attempting to rebuild investors’ confidence as BP’s share price has underperformed in comparison to Shell and international oil and gas peers.
The Canadian executive has set out plans to save at least $2 billion in costs by the end of 2026 and has frozen external hiring, except for frontline roles, well-site leaders and other safety-critical roles.
Bidding on new offshore wind projects has also been halted, in an attempt to simplify operations and cut costs. Instead resources have been focused on existing projects in the UK and Germany. BP sold its ten US onshore wind farms last month, exiting the market.
Shares in BP have fallen by 10 per cent since the start of the year, compared with a 1.5 per cent increase in Shell’s share price.
Shell was boosted by a better-than-expected gas trading performance during the third quarter, alongside higher liquefied natural gas production. Guidance for liquefaction volumes was raised to between 7.3 million and 7.7 million tonnes, up from 6.8 million to 7.4 million tonnes previously. Analysts at Barclays raised the net operating income forecast for the integrated gas division by 3 per cent to $2.8 billion.
However, weak refining margins continued to plague the group, falling to $5.50 a barrel, from $7.70 in the second quarter. The chemicals business is expected to report a loss for the third quarter when Shell reports the figures on 31 October.
Shares in BP were trading 1.4 per cent, or 5¾p, higher at 423p, in late morning trading, while Shell rose 1.8 per cent, or 47½p, to £26.25.