BP's profits surge in 2017 with brighter future forecast
06 February 2018
BP reported profits in 2017 of $6.2 billion, compared to $2.6 billion the previous year. This was mainly due to higher prices and increased oil and gas output, allowing the company to forecast an end to the downturn that has affected the oil and gas sector over the last three years. The group also said that 2017 saw a reduction in the number of process safety events for the fifth year running.
BP Group CEO Bob Dudley said: “2017 was one of the strongest years in BP’s recent history. We delivered operationally and financially, with very strong earnings in the Downstream, Upstream production up 12%, and our finances rebalanced. And we did all this while maintaining safe and reliable operations.
“We enter the second year of our five-year plan with real momentum, increasingly confident that we can continue to deliver growth across our business, improving cash flows and returns for shareholders out to 2021 and beyond. At the same time, we are embracing the energy transition, seeking new opportunities in a changing, lower-carbon world.”
Figures for 2017 include the following:
* Operating cash flow for 2017, excluding Gulf of Mexico oil spill payments, was $24.1 billion, compared with $17.6 billion in 2016. Gulf of Mexico oil spill payments in 2017 were $5.2 billion, compared with $6.9 billion in 2016.
* Downstream earnings were very strong with underlying replacement cost profit of $7.0 billion, 24% higher than 2016.
* Operational reliability was high, with refining availability and Upstream BP-operated plant reliability* both 95%.
* Seven new major projects were delivered, boosting oil and gas production. Upstream production, excluding BP’s share of Rosneft production, was 12% higher than 2016, the highest since 2010. Including Rosneft, production was 3.6 million barrels of oil equivalent a day, 10% higher than 2016. Oil and gas realizations were 25% higher.
* Exploration delivered the most successful year for BP since 2004, with around 1 billion boe resources discovered.
* BP’s full year capital spending reached $16.5 billion, within the annual range of $15-$17 billion it plans to maintain until 2021.
* Non-operating items in the fourth quarter, which are excluded from underlying profit, included a $0.9 billion charge for US tax changes and a $1.7 billion post-tax charge relating to a further provision for claims associated with the Gulf of Mexico oil spill.
After years of spending cuts, BP should be able to generate profits in 2018 at an oil price of $50 a barrel, Chief Financial Officer Brian Gilvary told Reuters. The current price of a barrel of Brent crude is around $67, but Gilvary said he expected prices to come down again to $50-$55 a barrel by the end of this year.
Payments for the Deepwater Horizon incident and Gulf of Mexico oil spill continued to weigh on BP, bringing the total bill to date to $65 billion. Nevertheless, the yearly bill is declining steadily.
Full-year production rose 12% to 2.47 million barrels per day (bpd) after BP launched 7 new oil and gas fields in 2017, a record year. It is set to inaugurate 5 additional projects this year including in Egypt, Azerbaijan and the UK North Sea that will help it boost its production by 800,000 barrels per day (bpd) by 2020, which will be mostly gas.
But Reuters said cash flow fell short of market expectations, raising concerns that cost cuts have run their course, a similar situation to other sector giants such as Royal Dutch Shell, Exxon Mobil and Chevron which reported last week.
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