BP Goes Big on Shale Oil Drilling as Many Rivals Flatline Output

t6w6a5fix26u6toqa3crxv[s_media_dl_1.png BloombergArticle content(Bloomberg) — BP Plc is aggressively expanding shale drilling, bucking the conservative approach of many rivals, as the UK oil giant seeks to reverse years of anemic output.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe company’s BPX Energy unit plans to increase production from shale fields by 8% this year, BPX Chief Executive Officer Kyle Koontz said during an interview in Houston. Shale output equivalent to 500,000 barrels a day would make up roughly 20% of the parent company’s current worldwide production.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentBy the end of the decade, Koontz’s goal is to raise that to 650,000 a day. The plan is part of BP’s grander ambitions of reversing a plunge in production, profits and shareholder value from an ill-starred 2020 pivot to renewables and low-carbon alternatives. Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe contrarian move also comes as marquee shale outfits such as Diamondback Energy Inc. and EOG Resources Inc. rein in production growth, taking a wait-and-see approach amid widespread warnings of an impending worldwide crude glut that would tank prices. Article contentKoontz, a University of Oklahoma-trained petroleum engineer who cut this teeth at shale pioneer Tom Ward’s SandRidge Energy Inc., aims to squeeze more crude from US shale fields while lowering operating costs, a move that will free up more cash for the parent company’s far-flung international pursuits.Article content“We’re also going to spend $800 million in less capital” on the way to the 2030 target, Koontz said. “The reason that’s exciting for BP is that allows them to sanction other growth projects; they can redeploy that capital to other growth.”Article contentOnce a formidable member of the elite club of international supermajors that includes Exxon Mobil Corp. and Chevron Corp., BP fell on hard times after betting big on a shift away from fossil fuels that mostly failed to materialize. Article contentArticle contentBP’s overall output plunged as the company shed crude and gas assets, and trimmed upstream investment. Its market capitalization is still almost 40% below where it was in early 2019. The company now ranks below ConocoPhillips and Brazil’s Petrobras in terms of valuation.Article content“BPX is a core part of BP,” Carol Howle, the BP trading chief who is serving as interim CEO until Meg O’Neill takes the helm in April, said during a conference call. “It’s got a great production forecast through to the end of the decade.” Article contentKoontz’s growth initiative comes after a chaotic year in which the parent company has been pushed by activist investor Elliott Investment Management for drastic change and Murray Auchincloss was ousted as CEO. Article contentAs BP works to repair its balance sheet, executives have been fielded the questions from analysts about whether it wouldn’t be wiser to unlock the value of BPX by selling it or spinning it off.Article contentDuring the interview, Koontz declined to disclose the breakeven oil prices for BPX’s operations in the Permian Basin, Eagle Ford or Haynesville shale regions. International crude prices have been trading below the $70 per-barrel price assumption used in BP’s strategy, which was announced last February.Trending Australia ships LNG 25,000 kilometres to Eastern Canada amid Asian slump Oil & Gas Canada's housing market suffers largest price decline among major economies, says BIS Real Estate Posthaste: Canadians' retirement savings goal of $1.7 million increasingly unattainable, BMO survey finds News RBC tops earnings estimates on strong retail and wealth management profits Banking B.C. widow worried about retirement income with OAS clawbacks Family Finance Article contentBut he noted that short-term market blips aren’t likely to disturb long-term drilling plans. BPX probably wouldn’t alter its growth plan unless there was a larger macro disruption like the Covid-19 pandemic that collapsed the industry.Article content“Where we struggle in the past and other companies struggle in the past is you start cycling capital too much,” said Koontz, a native of Midland, Texas — the unofficial capital of the Permian — who played linebacker for his high school football team that won a state championship in the 1900s. “It’s hard to get good, steady-state operations and you don’t get the benefit of that manufacturing approach” with roller-coaster budgeting.Article content—With assistance from Mitchell Ferman.Article contentShare this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Australia ships LNG 25,000 kilometres to Eastern Canada amid Asian slump Oil & Gas Canada's housing market suffers largest price decline among major economies, says BIS Real Estate Posthaste: Canadians' retirement savings goal of $1.7 million increasingly unattainable, BMO survey finds News RBC tops earnings estimates on strong retail and wealth management profits Banking B.C. widow worried about retirement income with OAS clawbacks Family Finance