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.
The company yesterday reported a replacement cost loss, which adjusts for changes in the value of inventory, of about US$1 billion, compared with a loss of a little more than $5bn the previous year. BP’s fourth-quarter profit was $72 million, compared with a loss of more than $2bn the year before.
BP’s financial health has been overshadowed by the costs of the Deepwater Horizon explosion and oil spill in spring 2010, which resulted in the loss of 11 lives and billions of gallons of oil that spilt into the Gulf of Mexico.
The company has taken cumulative charges against income of about $63bn before tax, including about $7bn last year, down from $12bn the year before.
But BP’s chief financial officer, Brian Gilvary, said these charges were winding down and were expected to be much lower from this year.
Along with the chief executive Bob Dudley, he also outlined a more positive picture for growth, forecasting that new projects and acquisitions will add about 800,000 barrels of oil equivalent per day to its output by 2020.
Last year’s underlying profit was sharply lower, as expected, because of lower oil and gas prices, and tighter refining margins. Mr Dudley said benchmark oil prices, at an average of $44 per barrel, were at their lowest in 12 years, while refining margins were at their thinnest since 2010.
Underlying replacement cost profit, not accounting for one-off items such as the Deepwater Horizon charges, was about $2.6bn last year, compared with $5.9bn the previous year, and was at $400m in the fourth quarter, compared with $196m for the last three months of 2015.
An average of forecasts by analysts polled by newswires was $560m for fourth-quarter profit, which helped to push the shares lower yesterday. BP shares in London were down about 2.7 per cent at 463.55 pence.
Still, the BP executives said they expect higher oil prices this year as long as the Opec and non-Opec output restraint deal reached in December holds.
They also said that acquisitions last year and growth from existing projects will help top-line and profit growth.
Mr Gilvary said he expects a material impact starting in the first quarter this year from the acquisition in December of 10 per cent of Abu Dhabi’s onshore oil concession, a $2.2bn tab paid for in shares, making the emirate one of BP’s largest shareholders.
BP’s 10 per cent share of the concession’s output, which is on track to increase from 1.6 million barrels per day (bpd) to 1.7 million bpd by next year, will add significantly to its average daily oil volume of about 1.2 million bpd and comes at a time when benchmark oil prices are holding in the mid-$50s.
Mr Dudley also noted that after last year’s ramping up of six major projects, another six are due to come on-stream this year, as well as final investment decisions being likely on additional major projects, cumulatively adding at least 800,000 bpd to output by 2020.
This year’s new projects include the start-up of a major gasfield in Egypt’s West Nile Delta area.
“I think Egypt has been overlooked by people, but it has a lot of potential,” Mr Dudley said. “I think it has great potential as a gas market and its prospects to move to an export gas country are in very good shape.”
BP added to its Egyptian gas portfolio in November, buying Italian oil company Eni’s 10 per cent stake in the Zohr gasfield for $375m.
Another of BP’s major start- ups this year is the first phase of the Khazzan “tight” gasfield in Oman, where it is the operator and has a 60 per cent stake.
Mr Dudley has said that the Khazzan reservoirs in Block 61 are among the largest unconventional gas accumulations in the region, and output from the first two phases is estimated to be 1.5 billion cubic feet a day, meeting Oman’s needs for decades.
amcauley@thenational.ae
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