BP to introduce exploration spending cut

BP has announced that it will reduce its exploration spend following a decline in underlying profits.

The oil giant saw a 20 per cent drop in profits for the final three months of 2014 standing at $2.2 billion (£1.5 billion), compared to the same period last year. Full year profits were also down by ten per cent to $12.1 billion. This has resulted in BP announcing a reduction its capital expenditure plans which have been revised by $4 billion to $6 billion in the coming year.

While BP's latest trading update has been disappointing, it is not as bad as some analysts had predicted. Bob Dudley, group chief executive, explained that BP faced a challenging year but highlighted that it had managed to maintain its dividend for shareholders. He added that BP would pay a quarterly dividend of ten cents per ordinary share in March.

Mr Dudley said: "We have now entered a new and challenging phase of low oil prices through the near and medium term. Our focus must now be on resetting BP: managing and rebalancing our capital programme and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations.”

Falling oil prices

BP is just one of the companies affected by the slumping oil prices. Prices have been tumbling for the past six months prompting a meeting of the Organization of Petroleum Exporting Countries (Opec). The cartel, which includes the biggest oil producing nations in the world, discussed a potential cut in production to stimulate prices.

Nations such as Saudi Arabia, United Arab Emirates and non-member Russia all voiced their opposition to any form of cut production. Opec made the decision to keep production at its current level with officials confident that the oil market would return to normal in due course.

BP's share price is down 16 per cent since the summer months thanks to falling oil prices.