BP BP Plc

By Sarah Kent 

LONDON-- BP PLC reported its second consecutive annual loss Tuesday, as weak oil prices continue to weigh on the profits of the world's biggest oil companies.

London-based BP said its replacement cost loss--a number analogous to the net income that U.S. oil companies report--narrowed to $999 million in 2016, compared with a loss of $5.2 billion a year earlier. The company reported a small profit in the fourth quarter of $72 million, compared with a loss of $2.2 billion in the same period of 2015.

BP's shares fell 2.4% in early London trading after the company's underlying earnings missed analyst expectations.

Global oil companies continue to struggle with a yearslong slide in oil prices that drag on earnings, despite an uptick in the market in recent months. BP's figures cap a mixed set of results after Chevron Corp. and Exxon Mobil Corp. posted disappointing earnings and Royal Dutch Shell PLC surprised with a cash surge, despite reporting weak profits.

Oil giants have spent much of the last three years scrambling to bring their spending in line with cash generation as oil prices plummeted and investors worried about the sustainability of their sizable dividend programs.

Despite success in reducing costs and cutting capital spending by more than previously announced, BP's latest set of results are a prime example of the toll low oil prices have taken. The company's underlying net cash generation tumbled 13% last year compared with 2015, hammered by the weak market.

But the company still struck a confident tone, completing a number of acquisitions late last year and tweaking its capital spending plans higher in 2017 to invest in its new fields. The company's chief financial officer Brian Gilvary said he sees oil prices staying comfortably above $50 a barrel this year.

"Even if oil prices averaged $55 a barrel this year, the dividend is still well underpinned," Mr. Gilvary said. "It's probably the most secure it's looked in years."

The company has revised the target oil price it needs to cover its capital budget and investor payouts from cash flow to $60 a barrel by the end of the year, adjusting for higher spending plans and a weaker refining environment. It had previously said it would only need oil prices of $50-$55 a barrel to cover its spending in 2017.

BP's results are also still encumbered by payments relating to its 2010 blowout in the Gulf of Mexico, which cost the company another $7.1 billion in pretax payments last year. The company said the total bill for the disaster that killed 11 rig workers and spilled millions of barrels of oil into the Gulf has now reached $62.6 billion. Cash payouts relating to the spill are expected to total around $4.5 to $5.5 billion this year, but fall sharply to around $2 billion in 2018 and a little over $1 billion in 2019.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

February 07, 2017 04:03 ET (09:03 GMT)

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