Shares in oil giant BP fall as it posts $999m annual loss

Feb 08, 2017, 00:25
Shares in oil giant BP fall as it posts $999m annual loss

On an underlying basis, fourth-quarter replacement cost profits more than doubled to 400 million U.S. dollars (£322 million) from 196 million United States dollars (£158 million) a year earlier.

Oil giant BP plc (BP.L,BP_UN.TO,BP) reported Tuesday a profit in its fourth quarter, compared to last year's hefty loss, benefited from higher oil prices and significantly lower costs.

BP narrowed its loss last year and expects recent acquisitions in Abu Dhabi and Egypt to help grow its output again after a long period of retraction following the Deepwater Horizon disaster seven years ago.

Stripping out these and one-off costs, annual profits were well down on 2015 as BP battled the "challenging" price environment for oil - which averaged $44 a barrel for the year. This helped annual losses improve from the mammoth 5.2bn USA dollars (£4.2bn) loss posted in 2015, which was its worst result for at least 20 years.

"BP needs oil to fetch $60 a barrel this year to effectively break even, and with Brent now trading at around $56, it is still dependent on fair winds from the commodity markets to push it along", Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers, said in reaction to yesterday's results update.

"Continued tight discipline on costs remains essential", Bob Dudley, BP group chief executive, said in the accompanying press release.

The company, whose fourth-quarter profits fell short of street expectations, had previously targeted a breakeven oil price of $50/bbl to $55/bbl.

The British oil giant also delivered some surprising news when executives said Tuesday that the company now needs oil prices of about $60 a barrel to balance its spending and cash flow, up from the $50 to $55 a barrel they had previously indicated, after a series of acquisitions late previous year. Everything we have done during the year has made us a more resilient and competitive company. The oil major said this year's results included a total of $4bn non-operating charges relating to the 2010 Gulf of Mexico oil spill.

The results differentiate BP fro competitors including Royal Dutch Shell and Exxon Mobil, who are now breaking even, with BP unlikely to achieve this status until the end of the year.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said BP's performance and the 7% yield on its shares showed the company was "still dependent on fair winds from the commodity markets to push it along".

Shares fell on the fourth-quarter earnings disappointment.

Dudley added: "With our Deepwater Horizon financial liabilities now substantially behind us, BP is fully focused on the future".

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