With eyes on weak oil prices, BP Plc (NYSE: BP) is tightening spending next year as it looks to deliver 800,000 barrels per day (bbl/d) of oil in new net production by 2020.

The company, which reported a nearly 80% year-on-year fall in profits for first-quarter 2016, hopes to build on what BP CFO Brian Gilvary called strong performance in the North Sea, Lower 48 and the Gulf of Mexico, which offset declines in places such as Trinidad and North Africa. Excluding Rosneft, BP’s production grew by 5.2% to 2.4 million barrels of oil equivalent per day (MMboe/d), compared to a year earlier.

However, the company did not earn as much due to subdued oil prices, despite lowering cash costs. The company said it made efficiency gains, cut thousands of jobs and divested assets to help pay for more than $1 billion in payments related to the Deepwater Horizon oil spill.

Cash costs for the past four quarters were $4.6 billion lower than in 2014, BP said.

With Brent averaging $34 a barrel for the quarter BP said its underlying replacement cost profit was $532 million. A priority for BP is maintaining its dividend.

Upstream performance, however, was among the bright spots for BP.

“Operational performance is strong and our work to reset costs has considerable momentum and is delivering results,” Bob Dudley, BP group chief executive, said in a news release. “Furthermore, development of our next wave of material upstream projects is well on track.”

So far this year, BP has started production at the In Salah Southern Fields in Algeria where it is developing four dry gas fields—Gour Mahmoud, In Salah, Garet el Befinat and Hassi Moumene—with partners Sonatrach and Statoil. Gross production is expected to peak at 75,000 boe/d. Production also started at the ExxonMobil-operated Point Thomson project in Alaska.

Speaking during a conference call April 26, Gilvary said two projects are in the commissioning stage and two additional projects are progressing toward startup later in the year with facilities work near completion. These include the Quad 204 project which will utilize an FPSO vessel to recover oil from the Schiehallion Field after installed West of Shetland this summer.

Adding Barrels

BP’s future projects appear to be moving forward for now, according to Gilvary.

“Our 2017 startups are on track and together with our six 2016 startups we expect to put in place 500,000 oil equivalent barrels per day of new net BP capacity by the end of 2017 versus 2015,” he said.

BP’s progress on major projects includes:

  • Khazzan project facilities—now 69% complete with 46 well pads completed. With Oman Oil as its partner, BP aims to develop about 7 trillion cubic feet (Tcf) of gas with plateau production of about 1 billion cubic feet per day (Bcf/d) of gas.
  • Juniper—BP’s Trinidad LNG trains are progressing well with more than 55% of facilities complete. An unmanned platform will be used to produce gas from the Corallita and Lantana fields from five subsea wells. Production capacity will be about 590 million standard cubic feet per day of gas;
  • West Nile Delta project in Egypt—facilities for the nine-well subsea Taurus/Libra phase of are about 50% complete. The project is one of two targeting 5 Tcf of gas and 55 MMbbl of condensate, according to BP; and
  • Clair Ridge development—Topside modules in the U.K. North Sea are en route from South Korea, expected to arrive later this quarter.

“Beyond these 2017 startups the production facilities for our Shah Deniz phase 2 project are ahead of plan at around 70% completion with first gas scheduled for 2018,” he added. “All of this means we remain on track for the delivery of over 800,000 barrels per day of production from new major projects by 2020.”

Potential for further growth could be on the horizon at the Eni-operated Nooros East discovery in Egypt, which has now been tied back to production, and the BP-operated Kepler-3 discovery, which he said is being tied to the Na Kika platform, in the Gulf of Mexico. Plans are for production to start later this year.

“These are great examples of the opportunities for rapid monetization of near-field discoveries, or what we call infrastructure-led exploration,” Gilvary said.

Spending Falls

BP said it plans to spend between $15 billion and $17 billion in 2017, down from a budgeted $17 billion for 2016, as it reduces costs across the board.

Gilvary noted the cost savings came from the upstream, downstream and corporate areas. For the upstream sector, “it’s more about more efficient ways of working, organization size and staffing costs.”

Gilvary said BP intends to lower its staff positions to around 20,000 by 2017. That is down from a peak of about 30,000.

The company expects costs for 2017 to be $7 billion lower than 2014

“As we steadily take out more costs, the point at which we expect to be able to rebalance 2017 organic sources and uses of cash continues to move lower; we currently anticipate being able to achieve this at oil prices in the range $50-55 a barre,” Gilvary said in the statement. “This progress underpins our commitment to sustaining BP’s dividend as the first priority within our financial frame. Should prices remain low, we have the flexibility to adjust further within the financial framework.”

Like fourth-quarter 2015, BP’s upstream segment had a pre-tax replacement cost loss—$747 million for first-quarter 2016.

“Lower costs, including the benefits of simplification programs and lower exploration write-offs, largely offset the impact of lower oil and gas prices,” the company said. “BP reported $66 million as its estimated share of Rosneft earnings for the quarter, compared with $235 million in the previous quarter.”

Velda Addison can be reached at vaddison@hartenergy.com.