Higher oil prices and increased upstream production from newly started fields helped BP (NYSE:BP) to more than double its 2017 earnings and beat expectations for Q4 profit.
BP reported on Tuesday an underlying replacement cost (RC) profit—its preferred metric for net income—of $6.2 billion for 2017, compared with $2.6 billion for 2016, in what CEO Bob Dudley described “was one of the strongest years in BP’s recent history.”
For the fourth quarter, BP booked underlying RC profit of $2.1 billion, up from $400 million for the same period of 2016, and ahead of the analyst expectations of $1.9 billion.
BP’s earnings were better than expected, unlike those of Exxon and Chevron who reported last week weaker than forecast Q4 results.
BP’s upstream production, excluding the company’s share of Rosneft production—in which BP holds 20 percent—increased by 12 percent on the year in 2017—the highest since 2010, thanks to seven new oil and gas projects.
Downstream earnings increased by 24 percent to $7.0 billion.
In exploration, BP said that it had its most successful year since 2004, with around 1 billion barrels of oil equivalent (boe) resources discovered.
The group’s operating cash flow—excluding the payments for the Gulf of Mexico oil spill—rose to $24.1 billion in 2017 from $17.6 billion in 2016. The payments related to the Deepwater Horizon disaster continue to weigh on BP’s finances, with Gulf of Mexico oil spill payments in 2017 at $5.2 billion, down from $6.9 billion in 2016.
BP has spent $343 million on the share buyback that it launched in the fourth quarter, fully offsetting the dilution from scrip dividends issued in the third quarter.
“Our share buyback programme in the fourth quarter offset the dilution from scrip dividends issued in September and our intent remains to offset any ongoing scrip dilution through further buybacks over time,” chief financial officer Brian Gilvary said in a statement.
Commenting on the 2018 plans, Dudley told CNBC:
“We’re not planning on $70 a barrel. We’re going to plan our year on $55 to $60, roughly, and if is higher we’ll more than deliver on our promises.”
Richard Hunter, head of markets at interactive investor, told the BBC:
“Wider market weakness has eclipsed the sturdy performance which BP has delivered. The company’s ability to generate cash remains prodigious. BP is in fine shape, particularly considering the tribulations of recent times.”
By Tsvetana Paraskova for Oilprice.com