XOM Exxon Mobil Corp

By Sarah Kent 

LONDON-- BP PLC is struggling to convince investors it can regain its top position among the world's elite energy players nearly eight years after the Deepwater Horizon disaster.

Chief Executive Bob Dudley has staked his legacy on reversing the company's lost prestige and turning it from a survivor into a stronger, more profitable company than it was before the 2010 oil spill. Since the disaster in the Gulf of Mexico, the company has tumbled from being the biggest oil and gas producer among Western publicly listed companies to third, behind Exxon Mobil Corp. and Royal Dutch Shell PLC.

Since BP outlined what it calls its "Getting Back to Growth" strategy last February, its executives say they have been met with skepticism from investors that have become disillusioned with a sector that has historically over-promised and under-delivered.

The company still has the weakest growth prospects among the world's big oil companies, says Macquarie, the Australian investment bank.

"I think it's right the shareholders are waiting to see delivery before they start getting behind the strategy," BP Chief Financial Officer Brian Gilvary said. He added that the company wouldn't have released its strategy "if we did not think we could deliver it."

BP's fourth-quarter results, due to be released on Tuesday, are an important milestone in the company's efforts to prove its doubters wrong. The company is expected to report net profit of $5.4 billion for 2017, its highest earnings since before oil prices crashed nearly four years ago, according to consensus estimates compiled by S&P Global Market Intelligence.

It comes after mixed results for competitors. Shell's net profit tripled last year, though investors are worried about a drop off in cash flow. Earnings at U.S. rivals Exxon and Chevron Corp. fell short of expectations and were punished with a substantial selloff on Friday.

Though BP's share price managed to reach its highest level in eight years last month on the back of an oil-market rally, it has underperformed compared with its British-Dutch rival Shell. The British oil giant's stock still trades roughly 20% bellow the price it commanded before the 2010 Gulf of Mexico blowout--a reminder of how far the company still has to go as it seeks to regain its former heft.

"With BP, investors tend to still be a little bit skeptical that they're going to do what they say they'll do," said Brian Youngberg, an analyst with Edward Jones in St. Louis.

Those concerns were underlined last month when BP disclosed it would take a new, unexpected $1.7 billion charge related to settlement costs from the disaster. That added to the company's nearly $65 billion bill stemming from the worst offshore oil spill in American history and reminded shareholders of the company's Deepwater Horizon handicaps.

BP has outlined a path to return its oil and gas production to 4 million barrels a day, helped by 800,000 barrels a day of new production by the end of the decade. It told shareholders it plans to boost its free cash flow to as high as $24 billion by 2021.

"Investors looked at that and said, 'Nah!,'" Mr. Gilvary said in a recent interview.

Mr. Dudley calls Deepwater Horizon costs amounting to over $1 billion a year a "headwind" no other company faces. But higher earnings--if they materialize for BP--would come after some success in delivering on its strategy over the past year.

It started up a record seven new projects in 2017 and, in a sign of growing financial strength, announced plans to recommence share buybacks in October. The company is expected to use its fourth-quarter results to underscore its confidence in the strategy that was laid out last February and paint an optimistic picture of its longer-term prospects beyond 2021.

"We just have to keep delivering," Mr. Dudley said in an interview. The company is "back on its feet. It's beyond walking, now it's starting to run."

"I think it's slightly unfair that people still don't believe them," said Rohan Murphy, an energy analyst at Allianz Global investors, which holds BP stocks. "They are doing it and proving it in their quarterly numbers."

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

(END) Dow Jones Newswires

February 04, 2018 09:14 ET (14:14 GMT)

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