BP PLC said Thursday it will write off $750 million from its second quarter earnings as a result of poor exploration results in Angola, an oil-rich country that the company has touted as a pillar of its business.
The British oil-and-gas company said it would give up its 50% stake in a license off the African country's south coast after deciding it wasn't worth developing a 2014 gas discovery there. BP said additional exploration write-offs in the country will also contribute to the charge, without giving more details.
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The shift in exploration strategy comes as BP is working to rebuild the company in the wake of its fatal blowout in the Gulf of Mexico in 2010 and a three-year plunge in oil prices that has rocked the entire industry.
After years of retrenchment, it is now back on the path to growth with plans to add 800,000 barrels a day of new oil and gas production by 2020. By the end of the decade, including its stake in Russian oil giant POA Rosneft, it expects to be pumping 4 million barrels a day -- as much as before the 2010 disaster.
BP said the $750 million noncash charge won't be tax deductible, but it also won't affect the company's cash flow for the quarter -- an increasingly important metric for investors worried about oil firms' ability to cover spending and dividend payouts with oil prices stuck below $50 a barrel.
BP has operated in Angola for decades and counts its operations there as some of its most important. When BP gained access to deepwater and ultra deepwater exploration licenses off the country's coast in 2011, it described the acquisition as a "major win."
Since then, priorities have changed following a precipitous drop in oil prices. Companies are increasingly moving away from expensive exploration in frontier regions, like parts of the Angola that remain relatively unexplored, to focus on areas where they already have operations and knowledge of the geology they are working with.
BP said the decision to write off its Angolan assets is part of a broader portfolio review, intended to focus the company more on natural gas and lower-cost oil projects near existing infrastructure. Those types of investments are expected to make the company more resilient in a world where oil prices remain low and more countries shift to lower carbon energy sources like gas and renewables.
The company pointed to its decision last year to scrap controversial plans to explore in pristine waters off the coast of Australia.
"We are making disciplined choices throughout our business," BP's exploration and production chief Bernard Looney said. "We are choosing not to pursue activities that we don't think will deliver maximum value for our shareholders."
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(END) Dow Jones Newswires
June 29, 2017 12:39 ET (16:39 GMT)