BP Pursues ‘25-by-‘25’ Target to Amp Up LNG Production

U.K. energy giant BP Plc wants to boost its LNG portfolio to 25 million tonnes per annum (mtpa) by 2025, up 9% compared to 23 mtpa in 2023 through the addition of equity and merchant supply, CEO Murray Auchincloss said during the company’s fourth-quarter 2023 webcast with analysts.

BP expects additional volumes from Venture Global LNG in the U.S. and the Greater Tortue Ahmeyim project offshore Africa on the maritime border of Mauritania and Senegal, as well as Stage 2 of the Waitsia Gas Project, which partners Beach Energy and Mitsui, Auchincloss said on a Feb. 6 earnings webcast.

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“If you go check the numbers, those add up to way more than 25 mtpa. So, that's why we feel very comfortable with ‘25-by-‘25’,” Auchincloss said. “I think 28 by ‘30 [28 mtpa by 2030] is already underpinned as well by a couple [of] contracts we've done in Oman and in Canada at Woodfibre [LNG]. So, you can already see those coming into the portfolio.”

Auchincloss told analysts that BP aims to take advantage of a bigger LNG portfolio in coming years. He said BP’s commercial dispute with Venture Global over the company’s inability to fulfill offtake commitments continues, but didn’t provide further details when responding to an analyst question.

In 2023, BP delivered 10 mtpa of incremental short and mid-term merchant volumes. During the year, BP also completed the restructuring of its Atlantic LNG project in Trinidad and Tobago, expecting the project to enable the next wave of projects in the twin-nation Caribbean country.

BPX production rising

In operations, BP reported combined production averaged 2.3 MMboe/d in 2023, flat compared with 2022. By 2025, the company expects production to average 2.3 MMboe/d, the company reported in a quarterly statement.

“I'm going to be super focused on returns and what [are] the right returns as we look across that versus the gas portfolio as well,” Murray said during the webcast. “There's a plethora of potential gas sanctions as well. So, I think that's the task of two years ahead.”

BPX, which comprises BP’s onshore oil and gas operations in the Lower 48, continues to boost production. The company produced 406,000 boe/d in the fourth quarter of 2023, up 28% compared to 318,000 boe/d in fourth quarter 2022.

For 2023, production averaged 366,000 boe/d with BPX averaging 11 operated rigs, up 13%. By comparison, in 2022 the major averaged 325,000 boe/d with 9 rigs. In 2023, BP ran five rigs in the Permian Basin and three each in the Eagle Ford and Haynesville shales.

BPX looks to bring online two new central processing facilities in the Permian: Checkmate and Crossroads.

“Checkmate is tracking well to be online this year, and the final one comes online next year,” BP CFO Kate Thomson said during the webcast.

Thomson said BPX was spending about $500 million to complete the infrastructure buildout.

“And then we'll be able to take that capital and use it to put into our effective production drilling activity, rather than using it to carry on completing the infrastructure,” Thomson said. “So that's kind of the way to hold it, is we're going to be able to fill those gathering units and then we're going to be able to redirect that capital to more productive uses as well.”

Transition from IOC to IEC

“As we look ahead, our destination remains unchanged—[transforming] from an international oil company (IOC) to an integrated energy company (IEC)—focused on growing the value of BP,” the company said in a release  Auchincloss added that the company was providing energy solutions to customers in need while “contributing to the energy transition—all the while remaining pragmatic and adapting in line with demand.”

BP reported EBITDA of $43.7 billion in 2023. Net debt fell to $20.9 billion at the end of 2023, down by about 2.3% compared to 2022 debt of $21.4 billion.

BP plans to execute a $1.75 billion share buyback before reporting first-quarter 2024 results, and an overall $3.5 billion repurchasing plan during the first half of the year. Between 2024 and 2025, BP plans to announce $14 billion of share buybacks, Thomson said in her prepared remarks.

“On a point forward basis, we are now committed to returning at least 80% of surplus cash flow. This is an enhancement to our previous guidance of 60% and is an affordable change underpinned by two things—the strength of our balance sheet and our confidence in the future performance of our business,” she said.

Looking forward to 2024 and 2025, BP expects to capex of $16 billion each year, in line with its medium-term target of $14 billion to $18 billion. The company’s capex was $16.3 billion in 2023.

The company took some criticism from analysts. Wells Fargo researchers said BP doesn’t have a well-defined “place” in the market, based on conversations analysts have had with both traditional and non-traditional energy investors.

“Investors are unsure whether to value BP as a traditional IOC, an unregulated utility, or something else. In our view, this uncertainty hampers valuation and underpins our Equal Weight rating,” Wells Fargo said in a Feb. 6 research report. “However, the successful delivery of several ventures underway, including acquisitions, project ventures, and a committed cash return framework could lend upside.”