Feb 28, 2017
BP and Shell moves point to oil industry recovery
BP has raised its medium-term growth forecasts while Royal Dutch Shell has given the go-ahead for its first new offshore project for almost two years, in a sign of returning confidence at the oil and gas producers. Bob Dudley, BP chief executive, saw "Excellent growth prospects" as he raised projections for cash flow over the next five years in response to recovering oil prices, falling costs and increasing production. The Shell go-ahead, together with BP's bullish outlook, reflected the improving mood among global oil and gas groups after the partial rebound in crude prices to around $55 a barrel - double the 12-year lows hit in early 2016. The UK group said it was aiming to generate pre-tax free cash flow of $13bn-$14bn from upstream exploration and production in 2021 at an oil price of $55 a barrel, compared with a previous target for $7bn-$8bn at oil prices of $50 in 2020. For Shell, the Kaikias go-ahead marked a return to cautious organic reserve replacement after completing the integration of BG Group, acquired last year for £35bn. The field lies in the prolific Mars-Ursa basin 130 miles off Louisiana and is estimated to contain more than 100m barrels of oil and oil equivalent, with a break-even price below $40 per barrel.
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