BP profits surge after oil giant shrugs off three-year slump

BP’s profits more than doubled in 2017 to $6.2 billion powered by higher prices and output of oil and gas, allowing the company to resume share buybacks as it recovers from a three-year downturn. (AFP)

LONDON: BP’s profits more than doubled in 2017 to $6.2 billion, powered by higher prices and output of oil and gas, allowing the company to resume share buybacks as it recovers from a three-year downturn.
The London-listed company saw one of the strongest output increases in its history last year, lifting production to levels not seen since the 2010 Deepwater Horizon spill.
Production is set to continue growing into the end of the decade thanks to more field start-ups this year.
BP would generate profits in 2018 at an oil price of $50 a barrel, Chief Financial Officer Brian Gilvary told Reuters, as years of spending cuts kicked in and it slowly shakes off a $65 billion bill for penalties and clean-up costs of the 2010 spill.
BP was the first among its European peers to resume share buybacks in the fourth quarter of 2017 after years of dilutive austerity measures in the face of the industry slump.
With a 20 percent bounce in oil prices in the last quarter of 2017 to $61 a barrel, BP had a surplus of cash that allowed it to buy $343 million worth of shares in the fourth quarter, offsetting the scrip dilution.
“2017 was one of the strongest years in BP’s recent history,” CEO Bob Dudley said in a statement. “We enter the second year of our five-year plan with real momentum, increasingly confident that we can continue to deliver growth.”
Full-year production rose 12 percent to 2.47 million barrels per day (bpd) after BP launched seven new oil and gas fields in 2017, a record year.
It is set to start up six additional projects this year, including in Egypt, Azerbaijan and Britain’s North Sea, helping boost production by 900,000 barrels of oil equivalent per day by 2021, most of it gas. It previously said it would launch five new projects this year.
BP added about 1 billion of barrels of oil, equivalent to its reserves in 2017, the largest since 2004, thanks to six discoveries, including in Senegal and the North Sea. Its reserve replacement ratio was estimated at 143 percent for the year.
The company’s refining and trading business, known as downstream, saw profits rise to $7 billion in 2017 as earnings for the marketing division rose by more than 10 percent.
Cash flow in the fourth quarter rose slightly to $6.2 billion, but fell short of market expectations, raising concerns that cost cuts have run their course and echoing concerns about rivals Royal Dutch Shell, Exxon Mobil and Chevron which reported last week.
The weakness was due mostly to lower-than-expected income from refining operations, BMO Capital Markets analyst Brendan Warn said.
Payments for the Deepwater Horizon spill continued to weigh on BP, which took a $1.7 billion charge in the quarter due to higher-than-expected claims settlements, bringing the total legal and clean-up costs to $65 billion.