Oil major BP reported a surge in fourth-quarter profit as oil and gas output rose sharply following the acquisition of BHP’s U.S. shale assets.
Fourth-quarter underlying replacement cost profit, the company’s definition of net income, reached $3.5 billion, exceeding its own forecast of $2.63 billion. This compares with 2.1 billion in the year-earlier period.
Bob Dudley, group chief executive of BP said: "We now have a powerful track record of safe and reliable performance, efficient execution and 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.”
For the year, BP’s profit rose to $12.7 billion, double the previous year’s $6.17 billion. The company started up six upstream major projects during the year, marking a total of 19 launched since 2016.
BP’s quarterly production was 2.63 billion barrels of oil per day (boepd), 1.8 per cent higher than 2017. Underlying production for the quarter increased by 3.4 per cent, due to major project ramp-ups, the company said.
For the full year, production was 2.54 billion boepd, up 3 per cent than 2017. Underlying production for the full year was 8.2 per cent higher than 2017 due to major project ramp-ups and improved plant reliability.
On 31 October, BP completed the acquisition of BHP’s US unconventional oil and gas assets.
“We expect full-year 2019 underlying production to be higher than 2018 due to major 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.
Gulf of Mexico oil spill payments in 2018 totalled $3.2 billion on a post-tax basis, while total divestments and other proceeds in 2018 were $3.5 billion. BP said it intends to complete more than $10 billion divestments over the next two years, which includes plans announced following the BHP transaction.
BP set out its approach to advancing the energy transition in 2018, introducing its ‘reduce-improve-create’ framework and setting clear targets for operational greenhouse gas emissions, towards which it is already making significant progress.
“Our strategy is clearly working and will serve the company and our shareholders well through the energy transition," Dudley added.
The company’s operating cash flow, excluding Gulf of Mexico oil spill payments, for full year 2018 was $26.1 billion, including a $2.6 billion working capital build. This compares with $24.1 billion for 2017, which included a working capital release of $2.6 billion.
Brian Gilvary, BP chief financial officer said: “Operating cash flow excluding working capital change was up 33 per cent for the full year and 17 per cent higher than last quarter, including a positive contribution from our new US assets. The continued strong cash flow growth underpins the balance sheet as we absorb the BHP acquisition and deliver more than $10 billion of divestments over the next two years.”