BP annual profit soars to $9.4bn on surging oil prices

BP said its full-year production of oil and gas grew 2.4 percent to 3.7 million barrels per day. (AFP)
Updated 05 February 2019

BP annual profit soars to $9.4bn on surging oil prices

  • Profit after tax rocketed from $3.4 billion in 2017
  • Fourth-quarter net profit stood at $766 million

LONDON: BP almost trebled its annual net profit to $9.4 billion (€8.2 billion) last year as oil prices soared in 2018, the British energy giant announced Tuesday.
Profit after tax rocketed from $3.4 billion in 2017, “primarily affected by higher oil prices and favorable foreign exchange” rates, BP said in a statement.
Fourth-quarter net profit stood at $766 million, up from $27 million in the final three months of 2017.
However, it was well down on 2018 third-quarter net profit of $3.35 billion, which was fueled by surging oil prices before they cooled approaching the new year.
BP chief executive Bob Dudley said the group was benefitting also from “capital discipline.”
“And we’re doing this while growing the business — bringing more high-quality projects online, expanding marketing in the downstream and doing transformative deals such as BHP,” he added in the statement.
In 2018, the world’s biggest miner BHP sold its US shale oil and gas operations to BP for $10.5 billion.
Oil prices meanwhile surged in the latter part of 2018 on tight supply concerns but have since fallen back sharply, in line with volatility seen across financial markets.
BP on Tuesday added that its full-year production of oil and gas grew 2.4 percent to 3.7 million barrels per day.
It said that 2019 output was expected to be higher thanks to major production projects.
“The actual reported outcome will depend on the exact timing of project start-ups, acquisition and divestment activities, OPEC quotas and entitlement impacts in our production-sharing agreements,” BP said.
Also last year, BP took a further hit of $3.2 billion in financial costs linked to a deadly explosion on a BP-leased drilling rig in 2010 that unleashed the worst environmental disaster in US history.
It expects a further charge of $2.0 billion this year, taking BP’s total bill so far for the Gulf of Mexico catastrophe to around $70 billion.
“Numbers from BP paint a picture of a company operating above expectations across all of its businesses,” noted Michael Hewson, chief market analyst at CMC Markets UK.
“The decline in oil prices in the fourth quarter, from four-year peaks of $85 a barrel saw profits decline slightly from the lofty levels” in the previous quarter, he added.
BP rival Royal Dutch Shell last week posted an 80 percent increase in annual net profit to $23.4 billion on higher oil prices and big cost cutting.
“Global oil majors are performing strongly at present, but these numbers from BP are superlative,” said Richard Hunter, head of markets at Interactive Investor.
“The Gulf of Mexico spill surprisingly still gets a mention ... although the figure is beginning at last to dwindle.”

Demand issues ‘to overshadow OPEC+ supply next year’

Updated 29 October 2020

Demand issues ‘to overshadow OPEC+ supply next year’

  • Libya's rising production adding to pressure on oil markets

DUBAI: The Organization of the Petroleum Exporting Countries (OPEC) and its allies will have to contend with a “lot of demand issues” before raising supply in January 2021, given throughput cuts by oil refiners, the head of Saudi Aramco’s trading arm said.
OPEC and its allies plan to raise production by 2 million barrels per day (bpd) from January after record output cuts this year as the coronavirus pandemic hammered demand, taking overall reductions to about 5.7 million bpd. 

“We see stress in refining margins and see a lot of refineries either cutting their refining capacity to 50-60% or a lot of refineries closing,” Ibrahim Al-Buainain said an interview with Gulf Intelligence released on Wednesday.

“I don’t think the (refining) business is sustainable at these rates (refining margins).”

However, Chinese oil demand is likely to remain solid through the fourth quarter and into 2021 as its economy grows while the rest of the world is in negative territory, he added.

Among the uncertainties facing the oil market are rising Libyan output on the supply side and a second wave of global COVID-19 infections, especially in Europe, on the demand side, Al-Buainain said.

Complicating efforts by other OPEC members and allies to curb output, Libyan production is expected to rebound to 1 million bpd in the coming weeks.

Oil prices, meanwhile, fell over 4 percent on Wednesday as surging coronavirus infections in the US and Europe are leading to renewed lockdowns, fanning fears that the unsteady economic recovery will deteriorate.

“Crude oil is under pressure from the increase in COVID-19 cases, especially in Europe,” said Robert Yawger, director of energy futures at Mizuho in New York.

Brent futures fell $1.91, or 4.6 percent, to $39.29 a barrel, while US West Texas Intermediate crude fell $2.05, or 5.2 percent, to $37.52.

Earlier in the day Brent traded to its lowest since Oct. 2 and WTI its lowest since Oct. 5.

Futures pared losses somewhat after the US Energy Information Administration (EIA) said a bigger-than-expected 4.3 million barrels of crude oil was put into storage last week, but slightly less than industry data late Tuesday which showed a 4.6 million-barrel build.

However, crude production surged to its highest since July at 11.1 million barrels per day in a record weekly build of 1.2 million bpd, the data showed.

Gasoline demand has also been weak overall, down 10 percent from the four-week average a year ago. US consumption is recovering slowly, especially as millions of people restrict leisure travel with cases surging nationwide.