BP Posts First Quarterly Loss in More Than a Year -- 2nd Update

02/06/18 05:26 AM EST
By Sarah Kent 

LONDON-- BP PLC posted its first quarterly loss since mid-2016 on Tuesday, largely because of charges from the 2010 Gulf of Mexico blowout and the U.S. tax overhaul, but 2017 proved its most profitable year overall since oil prices crashed.

A relatively strong set of fourth-quarter profits for BP were effectively wiped out by a nearly $1 billion paper loss related to U.S. corporate-tax changes and a $1.7 billion charge from unexpectedly high settlements from the Deepwater Horizon accident. The company recorded a $583 million loss for the fourth quarter.

However, BP says the U.S. tax overhaul enacted late in 2017 will be positive in the long term. The company says its Gulf of Mexico costs are manageable and are largely wrapping up.

The British oil-and-gas company was buoyed by a recovering crude market during a fourth quarter when oil prices averaged over $61 a barrel--up 24% from the same period in 2016.

For all of 2017, BP said its replacement cost profit--a number analogous to the net income that U.S. oil companies report--was $2.8 billion, compared with a loss of $1 billion in 2016. It was BP's first annual profit since 2014.

The company reported stronger production and healthy earnings from its refining and marketing division.

BP Chief Financial Officer Brian Gilvary said the company expects to cover its spending and dividend with cash from operations at $50 a barrel this year. The company is targeting a break-even price of $35 to $40 a barrel by 2021.

"This time last year we were talking about $60 a barrel, so we have a pretty good trajectory," Mr. Gilvary said.

The company's net debt rose 6% to $37.8 billion in 2017 compared with a year earlier, although it was on a downward trajectory in the fourth quarter compared with the three previous months.

BP's break-even oil price in 2018 is more like $56 a barrel, said Jason Gammel, oil-industry analyst at investment bank Jefferies, who wrote that his outlook for the company was "mildly positive."

BP's share price dropped over 2% in London trading Tuesday morning, though losses narrowed to 1.3% later. It was largely a result of the negative sentiment that has driven a stock selloff around the world and BP was down less than the FTSE100 and rival Royal Dutch Shell PLC.

BP's earnings are the latest in a choppy reporting season for big oil companies. Shell's net profit tripled last year, but a drop off in cash flow in the fourth quarter raised concerns among investors. U.S. rivals Exxon and Chevron both missed earnings expectations and suffered a substantial sell off as a result.

BP is still trying to convince investors it can regain its position among the elite tier of big energy companies. The company has lagged its peers since the fatal Deepwater Horizon explosion and oil spill in the Gulf of Mexico eight years ago. The disaster forced the company to sell off billions of dollars in assets to help finance a bill to cover clean up and legal costs that has ballooned to more than $60 billion.

BP outlined a path last February to boost profits and return to its former size by the early 2020s.

The company's return to profit last year reflects early success in delivering on that plan. Excluding its share in Rosneft, BP's production rose 12% in 2017 and in a sign of growing financial resilience, the company began a share buyback program in the fourth quarter.

BP Chief Executive Bob Dudley described 2017 as "one of the strongest years in BP's recent history," adding that the company was increasingly confident it could continue to deliver growth.

Write to Sarah Kent at sarah.kent@wsj.com


(END) Dow Jones Newswires

February 06, 2018 05:26 ET (10:26 GMT)

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