LONDON (AP) — BP sounded a somber note on the oil industry Tuesday, saying producers may have to adjust to an extended period of lower prices, as the company reported a fourth-quarter loss of $4.4 billion and announced spending cuts.
The London-based oil company followed Royal Dutch Shell and Chevron in curbing spending after the price of crude oil dropped about 50 percent last year.
The industry is going through a period that is much weaker than anyone anticipated, Chief Executive Bob Dudley said during a press conference.
“We’re in a raging gale,” Dudley said. “It’s a bit of a new world.”
The net loss reported by BP, which posted a profit of $1.04 billion in the fourth quarter a year earlier, includes a $5 billion writedown on the value of inventories.
After stripping out the effect of the drop in oil prices, BP reported a quarterly loss of $969 million, compared with a profit of $1.5 billion in the same period a year earlier.
BP plans to cut costs by as much as $6 billion this year, reducing exploration expenditures and postponing some projects, including development of the Mad Dog field in the Gulf of Mexico.
Dudley said the company was beginning 2015 in a stronger position because of divestments made in wake of the 2010 Gulf of Mexico oil spill. BP was already in the process of shrinking and simplifying its operations, with an additional $5 billion of divestments projected for this year.
“Our focus must now be on resetting BP: managing and rebalancing our capital program and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations,” Dudley said.
BP took a charge of $477 million in the fourth quarter for costs related to the 2010 disaster, bringing total charges for the spill to $43.5 billion.
Replacement cost profit from Russian oil company Rosneft, in which BP owns a stake, fell 57 percent to $451 million.
But slashing spending to preserve cash means the group will miss out on potential production should there be any recovery in the oil price in future years, said Garry White, the chief investment correspondent at Charles Stanley.
“The big problem for oil company executives is to maintain cash flows whilst investing enough in their business to ensure they have future production,” White said. “This is a fine balancing act.”
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