BP Q4 Profits Sink on Low Prices, Charges

BP has reported weaker profits for the fourth quarter, as a result of lower oil and gas prices and disposal charges.

The UK major’s underlying replacement cost (RC) profit – its definition of net income – came to $2.57bn in the three-month period, according to company results published on February 4, down from $3.48bn in the fourth quarter of 2018. Full-year underlying RC income was at $9.99bn, down from $12.7bn in the previous year.

Upstream RC profit before interest and tax slumped to $614mn in the fourth quarter, down from $4.16bn a year earlier. BP blamed the steep decline on $2.723bn of charges, mostly relating to asset disposals.

Excluding these charges and other non-operating items, the company’s exploration and production business generated $2.68bn in pre-tax underlying RC profit in the quarter, down from $3.89bn in the same period last year. The company pointed to weaker oil and gas prices, which more than offset a 2.7% growth in production to almost 2.7mn barrels of oil equivalent/day, not taking into account its stake in Russia's Rosneft.

Despite the dip in earnings, BP announced it would raise its dividend by 2.4% to $0.105/share, saying its firm capital discipline justified the move.

The company has offloaded $9.4bn of assets since the start of 2019, putting it well ahead of its $10bn target by the end of 2020. It plans to announce a further $5bn of disposal deals by mid-2021. BP was able to trim its net debt by $1.1bn in the fourth quarter, reducing its gearing from 31.7% to 31.1%.