BP: We promise we'll do better

BP has pledged to improve its underlying pre-tax profitability by more than $3bn (£2bn) over the next two to three years by cutting further costs and increasing efficiency.

Anthony Hayward, chief executive, announced the ambitious targets yesterday at the company’s annual strategy presentation to investors. It comes just a month after Shell said it planned to cut another $1bn of costs in 2010.

It is understood he wanted to show analysts that he could extend the cost-cutting programme he implemented after taking the job in 2007. The programme has already saved Europe’s largest oil company some $4bn but there were fears amongst the financial community it had done all it could.

Hayward made it clear there was still a lot more to do in what he called “a new phase to realise the potential of the portfolio built over the past decade.”

“The challenge and the opportunity for us is that while our portfolio ranks amongst the best in the industry, our financial performance has yet fully to reflect this,” said Hayward. “There is now a real opportunity to make this portfolio work harder for us and we intend to do just that.”

The majority of the expected savings are to come in its troubled refining and marketing arm, but there will also be significant organisational restructuring of its exploration and production unit.

“Whichever way you look at it, there are significant opportunities for improvement and in every case firm plans are in place to close these gaps,” he added. “Our direction is clear: the unrelenting pursuit of competitive leadership in respect of cash costs, capital efficiency and margin quality. We believe we have made a good start – but it’s only a start.”

At the same time as cutting costs BP plans to increase oil and gas production by one to two per cent year-on-year to 2015. The oil company intends to start up a total of 42 new major projects over the next five years, which is expected to add a million barrels to total production.

There were further rumours yesterday that BP was planning a bid for London based explorer Tullow Oil although Hayward refused to discuss acquisitions in any detail.

He said if BP was to make acquisitions it was likely to be of oil fields rather than companies.

“I would be surprised if we found good value on the corporate side,” he said. “It may happen but it’s not something we’re terribly focused on.”