BP PLC cut its capital spending plans for 2020 to $12 billion, or about 25% below its previously issued guidance, to prepare for financial impacts of the low oil price environment. The British energy supermajor also said it expects to book about $1 billion in noncash, nonoperating charges in the first quarter.
BP's upstream segment will see a reduction in spending of about $1.0 billion mainly on short-cycle onshore activity, including its U.S. onshore oil and gas business BPX Energy, as well as deferred exploration and appraisal activities, according to an April 1 news release.
As a result of the spending cuts, BP projects lower underlying upstream production for the full year compared to that of 2019, including a reduction of about 70,000 barrels of oil equivalent per day attributable to BPX Energy. First-quarter reported upstream production is projected to be between 2.55 million boe/d and 2.60 million boe/d, which is lower than fourth-quarter 2019 levels.
For the downstream segment, BP expects to lower spending by another $1.0 billion by cutting expenses across its fuels marketing, refining and petrochemicals segments. Declining demand for fuels, jet fuel and lubricants due to preventative measures against the spread of the novel coronavirus disease across the globe is expected to negatively impact downstream first-quarter results.
BP's $15 billion divestment program, scheduled to run until mid-2021, remains on track. However, the estimated $10 billion of divestment proceeds targeted by the end of 2020 may be revised if market conditions remain volatile. This includes BP's planned $5.6 billion sale of its entire business in Alaska to a Hilcorp Energy Co. affiliate.
By the end of 2021, BP anticipates $2.5 billion in cash cost savings, taking into account the effects of cost efficiency measures such as digitization and improved integration across the company.
As of the end of the first quarter, BP has roughly $32 billion of cash and undrawn facilities available.