BP in Profits Turnaround
Tuesday 1 August 2017
BP returned to profit in the second quarter to reverse a year-earlier loss despite suffering a heavy impairment, mainly on its Angola exploration activities.
The UK supermajor, led by chief executive Bob Dudley, notched up a quarterly profit attributable to shareholders of $144 million, compared with a loss of $1.42 billion in the same period of 2016, as cost-cutting bolstered its bottom line.
Its replacement cost profit, which excludes inventory gains and losses during the quarter, amounted to $553 million, versus a year-earlier loss of $2.25 billion.
Underlying replacement cost profit of $684 million was though down on on $720 million a year earlier, although it exceeded analysts’ forecast of $500 million.
"We continue to position BP for the new oil price environment, with a continued tight focus on costs, efficiency and discipline in capital spending,” Dudley said.
However, a $753 million exploration write-off - mainly due to sales of Angola exploration assets - weighed on the bottom line as well as compensation payments totalling $2 billion from the 2010 Macondo oil spill in the US Gulf of Mexico, which left BP with operating cash flow of $4.9 billion that was up from $3.9 billion a year ago.
In addition, the London-listed oil giant was hit by pre-tax charges totalling $706 million in the last quarter, including $347 million for the Macondo spill.
Despite this, its organic cash flow exceeded capital expenditure of $4.3 billion during the quarter, up from $4.2 billion in the same period of 2016, while production rose 10% year on year to 2.431 million barrels of oil equivalent per day.
The company has maintained annual capex guidance of between $15 billion and $17 billion and said it is targeting divestments totalling $4.5 billion to $5.5 billion by year-end, having earned $500 million from asset sales in the last quarter.
BP said it is on track to deliver 800,000 barrels of oil equivalent per day of fresh production by 2020 through development of new projects, having brought online three new field schemes so far this year with three more due online by year-end - including Eni-operated Zohr off Egypt.
In addition, it sanctioned two major new gas projects in the second quarter - R Series in India and Angelin off Trinidad & Tobago - and made four significant discoveries in the first half of this year including the major Yakaar find off Senegal.