UK supermajor BP joined on Wednesday its rivals in slashing capital expenditures and reducing U.S. shale production guidance in "the most brutal environment for oil and gas businesses in decades,'' with the double supply-demand market shock.
Other majors, including Shell, Total, Exxon, and Chevron, have already announced cuts in their capital expenditure (capex) for this year.
BP is taking actions to protect the health of the company by cutting this year's capex to US$12 billion, which would be 25 percent lower than the original capex guidance for 2020, the group said on Wednesday.
BP expects to slash around US$1.0 billion in upstream spend on short-cycle onshore activity, including in its U.S. shale unit BPX Energy. The supermajor will also defer some exploration and appraisal activity and look to optimize spending on its major ongoing projects.
As a result of the lower capex in shale, BP expects BPX Energy's 2020 production to be 70,000 bpd lower than last year's.
In the downstream business, BP will also slash capex by around US$1.0 billion, including reduced spending across the fuels marketing, refining, and petrochemicals businesses.
"This may be the most brutal environment for oil and gas businesses in decades, but I am confident that we will come through it - we know what to do and we have done so before," BP's chief executive Bernard Looney said in a statement.
Referring to Q1 2020 results, scheduled to be reported on April 28, BP said:
"Notwithstanding the interventions outlined above, the challenging environment is expected to have an impact on our first quarter results and there is uncertainty around how long current depressed commodity pricing and weakness in product demand will continue."
Currently, BP expects to take a non-cash, non-operating charge of around US$1 billion in Q1, the company said.
Yesterday, Shell said it expects the oil price collapse to lead to post-tax impairment charges of between US$400 million and U$800 million for the first quarter this year.
By Tsvetana Paraskova for Oilprice.com
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