BP Takes Tax Hit But Shows Strength -- WSJ
February 07 2018 - 3:02AM
Dow Jones News
By Sarah Kent
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 7, 2018).
LONDON -- BP PLC took a big fourth-quarter hit from costs tied
to the U.S. tax overhaul and the Gulf of Mexico oil spill, but
otherwise performed well as it works to re-establish itself among
Big Oil's elite.
BP's underlying profit, which excludes one-time costs, soared to
$2.1 billion in the quarter, compared with $400 million a year
earlier. The British oil-and-gas company was buoyed by a recovering
crude market during a quarter when oil prices averaged more than
$61 a barrel -- up 24% from 2016's final period.
On paper, though, BP's earnings were effectively wiped out by a
nearly $1 billion loss related to U.S. corporate-tax changes and a
$1.7 billion charge from unexpectedly high settlements from the
Deepwater Horizon accident in 2010. For the quarter, the company
recorded a $583 million replacement-cost loss -- a measure
analogous to the net income that U.S. oil companies report.
BP said on Tuesday that the U.S. tax overhaul enacted late in
2017 will be positive in the long term. The company says its Gulf
of Mexico costs are manageable and are largely wrapping up.
Despite the quarterly net loss, BP executives hailed the
company's financial standing. For all of 2017, BP had a
replacement-cost profit of $2.8 billion, compared with a loss of $1
billion in 2016. It was BP's first annual profit since 2014. The
company reported stronger production and healthy earnings from its
refining-and-marketing division.
The company's return to profit last year reflects early success
in delivering on its growth plan. Excluding BP's nearly 20% share
in Russian state-oil company PAO Rosneft, annual production rose
12%, and in a sign of growing financial resilience, the company
began a share buyback program in the fourth quarter.
Chief Executive Bob Dudley described 2017 as "one of the
strongest years in BP's recent history," adding that the company is
increasingly confident it can continue to grow.
BP finance chief Brian Gilvary said the company should be able
to cover its spending and dividend with cash from operations at $50
a barrel this year. The company is targeting a break-even price of
$35 to $40 a barrel by 2021.
"This time last year we were talking about $60 a barrel, so we
have a pretty good trajectory," Mr. Gilvary said.
The company's net debt rose 6% from a year earlier to $37.8
billion, although it was on a downward trajectory in the fourth
quarter compared with the previous three months.
BP's earnings are the latest in a choppy reporting season for
big oil companies. Shell's net profit tripled last year, but a drop
in cash flow in the fourth quarter raised concerns among investors.
U.S. rivals Exxon Mobil Corp. and Chevron Corp. both missed
earnings expectations and their shares suffered substantial
selloffs as a result.
BP used its earnings announcement to advance a campaign to
convince shareholders it can regain its position among the elite
tier of big energy companies. The company has lagged behind its
peers since the fatal Deepwater Horizon explosion and oil spill in
the Gulf of Mexico eight years ago. The disaster forced the company
to sell off billions of dollars in assets to help finance cleanup
and legal costs that have ballooned to more than $60 billion.
BP outlined a path last February to boost profit and return to
its former size by the early 2020s, but analysts raised concerns
about the company's longer-term growth outlook. BP on Tuesday
outlined efforts to boost production and returns out to 2025 and
said it would add 900,000 barrels a day of new oil and gas
production by 2021 compared with 2015. The company had previously
said it would pump an additional 800,000 barrels a day by 2020.
"We see growth without the need for acquisitions," said Bernard
Looney, the company's chief of exploration and production.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
February 07, 2018 02:47 ET (07:47 GMT)
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