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BP Revises 2020 Capex Downward as Coronavirus Drags Oil Down

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BP plc BP has announced the downward revision of its 2020 capital budget.

The integrated energy giant has set its 2020 organic capital budget at roughly $12 billion, suggesting a decline of roughly 25% from the prior guidance. Energy firms are now considering a significant capital spending reduction since the coronavirus pandemic has hurt global energy demand to a great extent. Its fellow ‘Big Oil’ companies that have already slashed 2020 capital spending budget are Royal Dutch Shell RDS.A, Chevron CVX and Total SA TOT (read more: Oil & Gas Stock Roundup: More E&P Companies Cut Capital Spending).

On the brighter side, although the business scenario is unfavorable, BP is not planning job cuts in the coming three months.

The company’s total capital budget revision includes a reduction of roughly $1 billion in investments for onshore operations which comprise its onshore oil and gas activities in the United States. With lower spending, BP expects its production in 2020 from U.S. shale plays to decline by 70 thousand barrels of oil equivalent per day (MBoE/D). The company also expects its total production volumes from overall upstream operations to decline year over year in 2020. BP added that in the March quarter of this year, its estimated production lies in the band of 2,550-2,600 MBoE/D, indicating a sequential decline.

For downstream business, which includes refining and marketing activities, the company has decided to lower capital spending by $1 billion. The company revealed that a significant decline in demand for jet fuels, fuels and lubricants has hurt its downstream operations in the first quarter 2020. 

In its operational update, BP added that as compared to 2019, there is likely be a realization of $2.5 billion of cash cost savings by 2021-end, thanks to digitization and increased integration across businesses. The company also estimates cash and undrawn facilities, as of first-quarter 2020, at roughly $32 billion.

BP p.l.c. Price


BP p.l.c. Price
BP p.l.c. Price

BP p.l.c. price | BP p.l.c. Quote

Headquartered in London, BP currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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