The oil industry's fiscal recovery is progressing faster than many expected: on Tuesday, BP announced that its profit for the first quarter rose to $1.5 billion, about 20 percent above analysts' expectations and almost three times its earnings in the same period last year.
Brent crude futures began to fall in late 2014 and bottomed out below $30 per barrel last January, hammering an industry that had calibrated its investment strategy towards the steady $100-per-barrel prices of previous years. The market gradually recovered over the course of 2016, and in recent months oil has traded within the range of $50-55 per barrel. While this level is below BP's long-term target – it says that it needs $60 oil to sustain its current E&P program – it is more than enough to boost profitability for the oil majors. ExxonMobil, Chevron and Total all posted strong quarterly numbers this past week, with Q1 profits of $4 billion, $2.7 billion and $2.6 billion respectively.
But the industry is the first to acknowledge that the recent profits have been driven by cost-savings measures as much as by recovering oil prices. The offshore sector has shed as many as 40,000 jobs worldwide since the start of the downturn, and exploration has virtually ground to a halt in many regions. At the Offshore Technology Conference (#OTC2017) on Monday, BP regional president Richard Morrison told Petroleum World that the firm had chosen to stop Gulf of Mexico exploration drilling, reduce its active rig count and cut its Gulf workforce in half in order to ensure profitability.
Still, BP has a significant production drilling program planned for the coming years, with major offshore projects like Mad Dog Phase 2, a new 140 bpd platform in the Gulf of Mexico, and Shah Deniz Stage 2, a cluster of natural gas wells and production facilities in the Caspian Sea. It has also committed $1 billion to the exploration of two blocks offshore Senegal, a relatively undeveloped region that BP CEO Bob Dudley described in December as "an emerging world-class hydrocarbon basin.”