BP's announcement of the Bumerangue discovery, described by CEO Murray Auchincloss as BP's most significant in 25 years, sparked an 8% surge in the company’s London-listed shares in August, outperforming sector peers.
If fully developed, the enormous field could prove transformational for the beleaguered $93 billion company, which in recent years has faced leadership turmoil, strategic drift, persistent takeover speculation and pressure from activist investors. This discovery reflects that fact that BP is now redirecting cash and talent upstream, after years of downsizing its exploration and reservoir engineering teams. It plans to boost annual upstream spending by 20% to $10 billion by 2027 and keep production steady at 2.3–2.5 million barrels per day through 2030.
BP appears to be pivoting back toward early 2000s strategy – and it's not alone.
For two decades, reserve size was a key investor metric for energy companies. To grow reserves, ‘Big Oil’ firms had to ramp up exploration spending, which grew from $5 billion annually between 1995 and 2005 to a peak of over $35 billion in 2013, according to consultancy Thunder Said Energy.
But the rush slowed in the mid-2010s as shareholder returns were eroded by soaring development costs and falling oil prices.
Appetite for exploration was further dampened by the 2015 Paris climate agreement and subsequent forecasts of slowing, if not shrinking, oil demand in the coming decade. Companies - and investors - began to fear that reserves could become stranded assets never to be tapped and to ultimately become worthless.
Consequently, exploration spending by ExxonMobil, Chevron, Shell, BP, and TotalEnergies dropped below $10 billion annually in recent years, and companies began to downplay reserve size. Today, Western oil firms hold reserves equivalent to 7 to 13 years of current production, down from 12 to 17 years a decade ago. BP’s reserves stood at 6.25 billion barrels of oil equivalent at end-2024, 8% lower than the previous year and equal to 7.25 years of production, compared with 15 years a decade ago.
Now, of course, the tide seems to be turning, as the excitement around the Bumerangue discovery indicates. Investor sentiment is shifting, and years of underinvestment mean that Western majors must now replenish reserves simply to maintain output.
