BP PLC pledged Tuesday to boost its annual pretax profit by more than $3 billion over the next two to three years by reducing costs and making its operations more efficient.
The company also extended its medium-term oil and gas production output forecasts. BP plans to lift output by an average of between 1 and 2 percent over the next five years and that it was increasingly confident of further growth to the end of the decade.
Chief Executive Tony Hayward said that BP's "portfolio ranks amongst the best in the industry," but the company's financial performance still has "some catching up to do."
"Whichever way you look at it, there are significant opportunities for improvement and in every case firm plans are in place to close these gaps," Hayward told analysts at the company's annual strategy update.
BP last month reported full-year replacement cost profit of $14 billion for 2009, a 45 percent decline from 2008. Replacement cost profit is the measure most closely watched by analysts. It excludes changes in the value of crude inventories and measures the amount it would cost to replace assets at current prices.
BP said cost-cutting and the creation of a new unit to manage development of all major new projects will allow it to reach its target for boosting pretax profits. The new unit based at the headquarters of its exploration and production business in Houston.
Hayward said the company's medium-term growth would focus on three areas: deep-water production, global gas, including unconventional gas, and managing some of the world's giant oilfields.
The company plans to begin production on 42 major projects worldwide over the next five years as existing fields decline.
The projects, to range from Russia to the North Sea, will contribute one million barrels of oil a day by 2015 or around a quarter of BP's total production — more than offsetting falling output from maturing fields. The company produced 4 million barrels of oil equivalent per day in 2009, an increase of 4 percent on 2008.
BP has less exposure to "unconventional" oil than many of its peers. That includes Royal Dutch Shell, whom it surpassed recently to become Europe's biggest oil company.
Hayward said there was a "real opportunity to make this portfolio work harder for us."
He also indicated that BP would extend its the cost-cutting program he instituted when he took the top job in late 2007. The program has saved BP some $4 billion.
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