BP CEO: The oil market will 'balance by the end of the year'
Dudley says in BP's first quarter results statement on Tuesday: "Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year."
While major players like Saudi Arabia are refusing to freeze production and Iran's significant oil supplies have only recently come onto the market, falling investment in new wells means that over the medium to longer term supply is likely to be constrained. The US oil rig count, for example, has dropped off a cliff since mid-2015 as cheap oil strangles the nascent shale oil industry there.
There are signs that the oil price could have already hit the bottom too. BP points out that oil prices averaged $34 (£23.45) a barrel in the first quarter of 2016, down from $54 (£37.25) a barrel in the first quarter of 2015, but are currently averaging $40 (£27.59) a barrel in the second quarter. That looks like progress.
Dudley's prediction that oil will be back on an even keel by the end of the year came as BP announced a set of first quarter numbers that showed improvement in the bombed out business. Here are the key figures:
- $583 million (£402 million) loss, better than the $3.3 billion (£2.2 billion) loss posted in the fourth quarter but down from the $2.6 billion (£1.8 billion) profit in the first quarter of last year;
- Unchanged quarterly dividend of 10 cents a share;
- Underlying cash flow of $3 billion (£2 billion);
- $1.1 billion (£760 million) of payments relating to Gulf of Mexico spill, including $530 million (£365.6 million) related to the 2012 criminal settlement;
- Capital expenditure of $3.9 billion (£2.7 billion), down from $4.4 billion (£3 billion) in the first quarter of last year.
In short, BP is stemming its losses by slashing costs. The oil giant announced at the start of the year it is cutting a huge 7,000 jobs to enable it to better weather the oil price storm.
Despite the steep plunge in BP's earnings on the same quarter last year, the figure still beat analysts estimates.
The company points out in today's results that cash costs in 2015 were $4.6 billion (£3.1 billion) lower than in 2014 and expected costs to be a full $7 billion (£4.8 billion) lower than 2014's levels by 2017.
Dudley, who suffered a humiliating pay rebellion earlier this month, says in today's results: "Despite the challenging environment, we are driving towards our near-term goal of rebalancing BP's cash flows. Operational performance is strong and our work to reset costs has considerable momentum and is delivering results. Furthermore, development of our next wave of material upstream projects is well on track."
Brian Gilvary, BP's CFO, says in the statement: "As we steadily take out more costs, the point at which we expect to be able to rebalance 2017 organic sources and uses of cash continues to move lower; we currently anticipate being able to achieve this at oil prices in the range $50-55 a barrel.
"This progress underpins our commitment to sustaining BP's dividend as the first priority within our financial frame. Should prices remain low, we have the flexibility to adjust further within the financial framework."