BP. Bp Plc

--BP achieved a profit in the fourth quarter, helped by the disposal of its petrochemicals business

--Net debt was reduced to $39 billion

--The oil major continues to expect to reach its $35 billion debt target in late 2021 or early 2022

By Jaime Llinares Taboada

BP PLC said Tuesday that it swung to a profit in the fourth quarter of 2020 and forecast that it will reach its deleveraging target in the fourth quarter of 2021 or the first quarter of 2022.

The British oil major made a net profit of $1.36 billion in the three months to Dec. 31, compared with a net loss of $450 million in the third quarter. The company's financial performance benefited from the $2.3 billion sale of its petrochemicals business.

Its underlying replacement cost profit increased to $115 million from $86 million quarter-on-quarter, but was below the company-compiled market consensus of $370 million, based on 26 brokers' estimates. The metric is similar to the net profit figure that U.S. oil companies use but strips out one-off items.

The full-year result was a loss of $5.7 billion compared with a $10 billion profit in 2019, driven by lower oil and gas prices, significant exploration write-offs and refining margins and depressed demand.

BP said operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments of $0.1 billion, was $2.4 billion. Compared with the third quarter, this reflected the significant impact of lower marketing volumes in downstream and a significantly weaker contribution from gas marketing and trading.

At year end net debt was $39 billion, down $1.4 billion over the quarter and $6.5 billion over the full year. Net debt is expected to increase in the first half of 2021, driven by severance payments, the annual Gulf of Mexico oil spill payment and payment following completion of the offshore wind joint venture with Equinor. It is expected to then fall in the second half with growing operating cash flow and the receipt of divestment proceeds.

BP said it continues to expect to reach its $35 billion net debt target around fourth quarter 2021 and first quarter 2022. This assumes oil prices in the range of $45-$50 a barrel and BP planning assumptions for refining marker margin and gas prices. The company said this summer it will return cash to shareholders through share buybacks once net debt is reduced to $35 billion.

BP declared a quarterly dividend of 5.25 cents a share, bringing the full-year payment to 31.50 cents, down from 41.00 cents in 2019.

The company said that oil prices have risen since the end of October and demand is expected to recover in 2021. Moreover, BP forecast U.S. gas prices will benefit from lower production and a recovery in international liquefied natural gas demand driven by Asia.

However, the group also projected that its Downstream division will be hurt by the pandemic in the first quarter of 2021, as restrictions weigh on product demand.

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT

(END) Dow Jones Newswires

February 02, 2021 03:19 ET (08:19 GMT)

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