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BP announces results on Tuesday. What to expect.

BP reports first-quarter results Tuesday morning as it prepares to step up its oil drilling program, including near the site of the worst failure, the Gulf of Mexico.

The 2010 Deepwater Horizon explosion in the Persian Gulf killed 11 workers, prompting BP to sell some of its oil assets to pay damages. But BP is back in search of new oil wells, with some of its most aggressive exploration projects in the Persian Gulf.

The company believes the projects it is working on could hold billions of barrels of oil.

“It’s time for BP to reopen this basin after a 15-year hiatus,” CEO Murray Auchincloss said on a fourth-quarter earnings call. “So we’re really excited about that.”

BP is also investing in new projects elsewhere, from Trinidad to Egypt. Revenues from most new projects will not have a significant impact on the first quarter results, as the company is still working on launching them. Instead, areas such as natural gas sales and trading may have a greater impact on the company’s results in the quarter.

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Analysts expect BP to earn $1.02 per share on $54 billion in revenue, below last year’s $1.66 billion and $56 billion. The expected decline is largely related to lower oil and gas prices.

The debate over BP in recent years has been whether the company should slow its transition to cleaner energy and focus on pumping more oil. BP has faced pressure from the UK government and activist investors over its greenhouse gas emissions.

The company has one of the more ambitious low-emission development plans among oil companies, including investments in biofuels, solar energy, wind energy and other areas. But longtime BP investors would prefer the company drill more today, given high oil prices and continued relatively strong demand for fossil fuels.

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Over the past three years, renewable energy returns have lagged those from oil and gas, and last year BP changed its long-term investment plan, reducing some of its climate commitments. The company said it aims to reduce oil and gas production by 25% by 2030 from 2019 levels, compared with a previous plan to reduce production by 40%. Since then, the stock has surged.

However, plans to increase oil and gas production can be as financially risky as investments in renewable energy sources, especially in the case of new oil projects. Total Energy
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for example, it faces challenges with its Uganda project after already making large investments.

BP says it will increase production by 2% to 3% annually through 2027, although the pace could accelerate depending on the number of new projects in the future. It also expects to sell some of its existing projects by 2030 to meet its production reduction targets.

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In the Gulf of Mexico, BP also faces reputational and environmental risks given its history with the Deepwater Horizon. Management will need to answer these questions as it prepares to move forward.

Write to Avi Salzman at [email protected]