BP Profits, Returns Surge in Q4
UK major BP reported February 5 a Q4 profit of $4.168bn, more than twice the $1.928bn in Q4 2017. There was a net gain of $136mn in Q4 2018 and a net charge of $144mn in the same period 2017, however.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for Q4 was $3.886bn, compared with $2.223bn in 2017. Return on capital employed was also up, from 5.8% to 11.2%. Its reserves replacement ratio was 1oo%.
The result for the fourth quarter mainly reflected higher liquids and gas realisations, strong gas marketing and trading results and higher production including the BHP assets in the US. Technical performance was very high, with a record 96% upstream reliability.
CEO Bob Dudley said BP has "a powerful track record of safe and reliable performance, efficient execution and capital discipline. And we’re doing this while growing the business – bringing more high-quality projects online, expanding marketing in the Downstream and doing transformative deals such as BHP. Our strategy is clearly working and will serve the company and our shareholders well through the energy transition."
Output up
Production for the quarter was 2.627mn barrels of oil equivalent/day, 1.8% higher than 2017. Gas output rose from 7.18bn ft3)/d to 7.57bn ft3/d, thanks to the US. Underlying production for the quarter increased by 3.4%, due to major project ramp-ups. BP said it expects full-year 2019 underlying production to be higher than 2018 thanks to major projects but Q1 reported production will probably be the same as last quarter as sales in the North Sea and Alaska and turnaround and maintenance activities mainly in the high margin Gulf of Mexico region will be offset by major project start-ups and the benefit of the BHP assets acquired by BPX Energy.
Operating expenses for the year, excluding Gulf of Mexico oil spill payments, were $26.1bn, similar to the $24.1bn in 2017. Organic capital expenditure for the full year of 2018 was $15.1bn and expects this year to spend in the range of $15-17bn. Sales and other proceeds totalled $3.5bn for the full year but this is to rise as BP intends to complete asset asales worth more than $10bn over the next two years.
Gearing at the end of Q4 was 30.3%. At current oil prices, and in line with growing free cash flow supported by divestment proceeds, BP expects gearing to move towards the middle of its targeted range of 20-30% in 2020.