BP Earnings Fall for Second Consecutive Year -- Update
February 07 2017 - 4:18AM
Dow Jones News
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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