By MARK LONG
DOW JONES NEWSWIRES
March 30, 2004; Page A2
LONDON -- Moving to shore up its stock price, BP PLC promised investors it will buy back shares with all its excess cash flow for three years, as long as oil prices remain higher than $20 a barrel.
The British oil giant said it will focus on delivering growth and boosting returns following some major acquisitions. BP, which bought U.S. companies Amoco in 1998 and Atlantic Richfield in 2000, is the world's second-largest publicly traded oil-and-gas company in terms of production, after Exxon Mobil Corp.
Analysts estimated the buyback program could be valued at $5 billion to $6 billion, about €4 billion to €5 billion, a year. BP has purchased $1.25 billion of its shares so far this year.
"There appears, at present, to be overwhelmingly more chance of the oil price being above $20 a barrel for the next few years, than not," said BP Chief Executive John Browne. Earlier this year, Lord Browne said BP would use an assumption of a price of $20 a barrel in planning projects, instead of $16 a barrel.
BP also returned to setting firm oil- and gas-production growth targets, saying it expects to increase its oil-and-gas production by an average of 5% a year, not counting the contribution from its Russian joint venture, from 2003 to 2008. Last year, BP paid nearly $8 billion to take a 50% stake in the TNK-BP joint venture in Russia.
Including output from TNK-BP, BP said it expects output to grow 7% a year on average through 2008, despite an expected drop in first-quarter production outside Russia, compared with the previous quarter, because of a strike in Trinidad and technical problems in Alaska.
BP said it had made additional discoveries off the Angolan shore. Angola, the deep-water Gulf of Mexico, Azerbaijan, Trinidad and the Asian Pacific region are the new profit centers that BP is focusing on for growth, outside its traditional patches in the U.S. and North Sea. Tony Hayward, head of exploration and production, said he expects output of two million barrels a day from the new profit centers by 2008, making up around 40% of BP's expected total production.
BP affirmed its targets for its sixth profit center, Russia, saying it expects production to increase 12% in 2004 as it boosts production from its large, aging fields there. Output for the years following still is expected to rise roughly 5%.
BP also noted that "individuals, not committees" are accountable for its decisions. Rival Royal Dutch/Shell Group has been criticized by shareholders for its complicated corporate structure, in which decisions are made largely by committees, and for poor communication, particularly after a 21% downgrade of its proven oil and gas reserves.
BP's reserves accounting, like that of other major oil companies, is being scrutinized following rival Shell's January cut in its proven reserves, particularly since BP appears to have booked more gas from a large Norwegian oil field than its partners, including Shell.
Byron Grote, BP's chief financial officer, reiterated that the company is "completely confident in the processes and methods in place" to account for reserves.
"BP is saying it acknowledges the power behind the company lies in its shareholder base," said Zac Phillips, an analyst at Teather & Greenwood.
BP's American depositary receipts rose 2%, or 99 cents, to $49.45 each in 4 p.m. New York Stock Exchange composite trading. In London, BP's shares rose 2.2% to 445 pence ($8.07 or €6.66).
Write to Mark Long at email@example.com