Global energy major BP eked out a small profit in the fourth quarter of 2020, as depressed demand, poor downstream sales and lower refining margins dented profitability.
The company's fourth-quarter underlying profit on a replacement cost basis, the main measure tracked by analysts, dropped to $115 million, from $2.57 billion in the prior-year period, the company said in its earnings release on Tuesday. The figure, which fell short of Bloomberg's average analysts' estimate of $440m, was a slight improvement the $86m income reported in the previous quarter.
“2020 will forever be remembered for the pain and sadness caused by Covid-19. Lives were lost, livelihoods destroyed. Our sector was hit hard as well,” Bernard Looney, BP chief executive officer, said.
“Road and air travel are down, as are oil demand, prices and margins.”
Crude prices have risen in the fourth quarter, buoying refining margins as vaccine rollouts boosted the prospects of an economic recovery and improved oil demand. However, a second wave of the virus – which upended trade and brought the global travel and tourism sector to a halt last year – has forced fresh lockdowns across much of the world.
Operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments of $100m, was $2.4bn, down from $5.4bn in the third quarter, which “reflected the significant impact of lower marketing volumes in downstream and a significantly weaker contribution from gas marketing and trading,” the company said.
Proceeds from asset sales in the quarter came in at $4.2bn, including $3.5bn on completion of the disposal of its petrochemicals business to British billionaire Sir Jim Ratcliffe's company, Ineos, for $5bn. On Monday, BP also agreed to sell a 20 per cent stake in an exploration block in Oman to Thailand's largest oil and gas producer, PTT Exploration and Production Public Company, for $2.6bn as part of its ongoing divestment programme.
The company said it has now completed or agreed transactions for over half of its target of $25bn in proceeds by 2025. It expects “proceeds from divestments and other disposals of $4bn to $6bn in 2021, weighted toward the second half”.
BP, like global peers such as Shell, aims to reach net zero emissions by 2050 as it integrates more renewables into its business and is using disposal proceeds to invest in new ventures.
While 2020 was an extremely tough year for the industry, BP sees better days ahead, Mr Looney said.
“It was also a pivotal year for the company. We launched a net zero ambition, set a new strategy to become an integrated energy company and created an offshore wind business in the US,” he said. “We expect much better days ahead for all of us in 2021.”
The company declared a full-year loss of $5.7bn, compared to a $10bn profit in 2019.
“Lower oil and gas prices, significant exploration write-offs" reduced refining margins and depressed demand drove annual income lower, it said.
The company’s debt at the end of last year shrunk to $39 billion, down $1.4bn in the fourth quarter and $6.5bn over the full year.
The company expects net debt to rise in the first half of 2021, driven by “severance payments, the annual Gulf of Mexico oil spill payment and payment following completion of the [US] offshore wind joint venture with Equinor”, it added.