BP will need to offload assets that are not high-grade
BAKU, Azerbaijan, Aug.5
By Leman Zeynalova – Trend:
BP will need to offload assets that are not high-grade, Trend reports quoting Will Scargill, Managing Oil & Gas Analyst at GlobalData.
“BP has set out ambitious targets for the realignment of its business within five and ten year time frames. An overhaul of this scale will require significant movements in the M&A market, if it is to be delivered in the targeted timeframe,” he believes.
Scargill pointed out that BP’s most significant renewables interests, at present, come from its 50 percent stake in Lightsource BP, which targets 10GW by 2023.
To reach 20GW by 2025 and 50GW by 2030 will likely require significant acquisitions on top of the expansion of capital spending that BP has set out, noted the analyst.
“In terms of its traditional oil and gas segment, BP will need to offload assets that are not high-grade to hit its targets of improving returns on capital from a reduced asset base. It is following up its previous $15bn divestment target with a target of $25bn for the period 2020-25. Assets most likely to be put on the market are legacy positions with little growth potential,” he added.
Luke Parker, Wood Mackenzie Vice President - Corporate Analysis, said that BP's oil and gas business will shrink dramatically, while the low carbon business will grow strongly.
"Oil and gas production is expected to fall by 40% by 2030, from 2.6 million boe/d in 2019 to 1.5 million boe/d. Refining throughput is expected to fall from 1.7 million b/d in 2019 to around 1.2 million b/d in 2030. BP will not be exploring in any new countries. High-grading will be a big driver: BP’s new disposal programme is targeting US$25 billion of proceeds from H2 2020 to end 2025.
"BP is guiding for a 10-fold increase in investment in low carbon energy and technologies (power, bio-energy, CCUS, hydrogen) by 2030, to around US$5 billion per year. Within that, the company will deliver a 20-fold increase in developed renewables capacity, from to 50 GW (through both organic and inorganic investment).
"The convenience and mobility part of the business is the other big area. This segment offers the most attractive returns in BP’s portfolio and BP is aiming to double its customer touch points by 2030 to 20 million. More marketing, more retail, more exposure to growth markets.
"The dividend cut will dominate the headlines. By its own Q1 reasoning, BP didn’t need to cut. Disposals have materially de-risked the financial outlook over the past few months – BP had done enough to cover an US$8 billion dividend pay-out in 2020 and 2021 at US$40/bbl Brent.
“But if ever there was a moment to reset, this was it. Several factors have converged to make it possible: coronavirus and everything that comes with it; a strategic pivot to net-zero on the horizon; Shell’s dividend reset; a new leadership with credit in the bank. Our view is that BP has taken the prudent course of action."
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