LONDON, Oct. 27 (UPI) -- With oil prices expected to recover only to the $60 per barrel mark by 2017, British energy company BP said it was retooling to fit a new market landscape.
BP announced Tuesday its profits for the third quarter were $1.23 billion, nearly 50 percent lower than the same quarter for 2014. Total revenue of $55.9 billion was 41 percent lower year-on-year.
Lower crude oil prices, down around 45 percent from this time last year, have brought a string of weak financial results from some of the biggest energy companies in the world. BP Chief Executive Bob Dudley said the company was planning to cut capital spending by as much as $19 billion per year through 2017 as the depressed oil economy continues.
Assuming oil recovers to $60 per barrel by 2017, Dudley said BP would have a balanced cash flow under the current plans.
"Last year, we acted decisively to reset BP for a sustained period of lower oil prices and the results are coming through well," he said in a statement. "We are now in action to rebalance our financial framework in this new price environment."
Goldman Sachs in mid-September said the U.S. benchmark for the price of crude oil, West Texas Intermediate, would average about $45 per barrel for 2016, down from the previous forecast of $57. WTI traded at $43.39 per barrel early Tuesday.
Crude oil prices are depressed because markets still favor the supply side as most major economies are slowing, as is the case with China, or growing at slow rates, like the United States. Year-on-year production for BP was up 4.4 percent and, this quarter, it grabbed access to reserves in British and Egyptian waters, home to one of the largest discoveries of the year.
BP in the second quarter said it lost $5.8 billion, which in part was a reflection of the July 2 settlement reached to resolve claims associated with the oil spill in the Gulf of Mexico in 2010. That, and divestments that will total $10 billion by the end of the year, means that, for BP Chief Financial Officer Brian Gilvary, the company is retooled for growth.
"Our principal objective is to re-establish the balance in BP's financial framework, with operating cash flow covering capital expenditure and the dividend" he said. "We are already making strong progress and the plans we have set out will allow us to achieve this without compromising BP's core growth options."