BP, Europe's largest oil company, is aiming to add $3 billion in profits and replace 1 million barrels per day of oil output over the next four years as the company bolsters its upstream operations to stave off production declines. BP is trying to stay ahead of rival Royal Dutch Shell, Europe's number two oil producer, and bring its equity valuation more in line with that of Exxon Mobil (XOM), the largest U.S. oil firm.
BP (BP) has been paring costs over the past several years, but estimates that 15% of its capital spending still goes to waste. BP expects to spend $20 billion on capital projects this year while Royal Dutch Shell (RDS-A) has forecast expenditures of $28 billion.
The ability of both firms and that of their rivals to lower costs this year may be hindered as oil services companies are no longer in a weak negotiating position when it comes to pricing. With oil prices high and explorers heading to more hard-to-reach and deep-water locations, they need the products offered by oil services firm and the service providers know this.
BP is evaluating ways to cut costs for its refining business and that could include disposing of some its seldom-used refineries. The company is targeting the North American shale market as one area for growth along with Russia, Iraq, Indonesia, Jordan and Egypt, among other locations. BP is the largest natural gas producer in the U.S.
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