BP swung to a profit over the full year from a $6.5bn loss in 2015. The oil and gas titan quoted an annual headline profit of $115m, though this was weakened by $4bn in legacy charges from the 2010 oil spill.
This prompted a bullish outlook from group chief executive Bob Dudley, who proclaimed the Deepwater Horizon financial liabilities were “substantially behind” the group.
Still, earnings in the fourth quarter of $400m were below market expectations, despite being nearly double the group’s underlying replacement cost profits from the year before. Dudley explained that this figure was bolstered by higher oil prices but also negatively impacted by a decline in refining margins.
BP’s share price reflected this disappointment Tuesday morning and was down 2.2% at 466p.
While the company expects the impact of the Deepwater Horizon catastrophe to lessen significantly over the coming years, “falling sharply” from $4.5 to $5.5bn in 2017 to $2bn by 2018, “the Gulf of Mexico oil spill continues to cast a long shadow on BP’s financial performance,” according to Hargreaves Lansdown senior analyst Laith Khalaf.
“The pricing environment remains challenging for the oil majors, and while things are looking better than they did a year ago, we’re still a long way short of those halcyon days when oil traded at over $100 a barrel,” he said.
“Indeed, BP needs oil to fetch $60 a barrel this year to effectively break even, and with Brent currently trading at around $56, it is still dependent on fair winds from the commodity markets to push it along.”
There are reasons for investors to be inspired by Dudley’s optimism for the future, said The Share Centre’s Graham Spooner, based on the group’s pipeline of upstream projects, tighter discipline on costs, and dwindling Deepwater Horizon financial liabilities.
