BP profit soars, fuelled by higher output
U.K. oil company is the latest in string of global energy giants to report bumper earnings
BP PLC tripled its annual earnings and swung to a fourth-quarter profit on increased output and higher crude prices, in line with other major oil companies that registered boosts on their balance sheets last year.
The U.K. energy company said Tuesday that it recorded a $2.7 billion replacement-cost profit—a measure akin to the net income U.S. oil companies report—for the final quarter of 2018. That compared with a loss of $583 million a year earlier, when BP was hurt by costs tied to the U.S. tax overhaul.
BP, whose shares were up 5% in London, has been focused on its recovery from the 2010 Deepwater Horizon disaster, which killed 11 people and led to the worst offshore oil spill in U.S. history. The disaster, also known as the Macondo blowout, continues to cost the company billions of dollars in payments each year.
Last year, it made solid headway in terms of production, with a 3% year-over-year uptick in oil and gas output. Excluding its Russian assets, BP had an average daily output of 3.7 million barrels of oil equivalent for 2018, its highest since 2010.
“It’s sort of getting back to pre-Macondo levels,” said Chief Financial Officer Brian Gilvary on a call with The Wall Street Journal. “It’s been one of our best safety years on record and that’s what drives results.”
BP is the latest big energy company to report bumper earnings. Other firms including Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell PLC lifted profits in 2018, reaping the benefits of their newly streamlined operations.
The U.K. company’s replacement-cost profit totaled $9.9 billion for 2018, up from $2.8 billion in 2017 and representing BP’s largest since a tumble in oil pric- es about four years ago led to an industrywide downturn.
In 2018, BP unloaded a total of $3.5 billion worth of assets. The company said it plans to complete more than $10 billion worth of divestments over the next two years to help offset its $10.5 billion acquisition of BHP Billiton Ltd.’s U.S. shale assets. The sale was completed last quarter.
Investors have been focused on the impact of the deal on BP’s balance sheet because of the firm’s intention to pay for the Australian miner’s assets entirely in cash.
Despite the deal, BP recorded organic capital expenditure for the fourth quarter at $4.4 billion, compared with $4.6 billion a year earlier.
Total capital expenditure for the year, which includes Deepwater Horizon payments and the BHP transaction, was $25 billion for 2018, up from $17.8 billion for 2017.
“Fourth-quarter adjusted group net income was exceptionally strong,” said Irene Himona, managing director for oil and gas at Société Générale. She noted that the results came in 32% higher than the market consensus.
BP declared a fourth-quarter dividend of 10.25 cents a share, in line with prior quarters after having increased its dividend 2.5% last July.
Analysts projected that BP generated enough operating cash flow for the full year to offset its organic spending and cover its payments to shareholders.
The firm said its full-year cash flow from operations adjusting for Deepwater Horizon and working capital was $28.7 billion.