BP profit falls 91%, missing estimates, as oil slump deepens

[LONDON] BP Plc reported a 91 per cent decline in fourth-quarter earnings after average crude oil prices dropped to the lowest in more than a decade.

Profit adjusted for one-time items and inventory changes totaled US$196 million, the London-based company said Tuesday in a statement. That missed the US$814.7 million average estimate of 10 analysts surveyed by Bloomberg, and compares with year-earlier profit of US$2.24 billion. Shares fell 5.1 per cent at 8:05 am in London.

While Chief Executive Officer Bob Dudley has trimmed billions of dollars of spending, cut thousands of jobs and deferred projects in response to the plunge in crude prices, BP's cash flow still doesn't cover spending and dividends. The company's debt level is rising and BP was among several major oil producers given a negative credit outlook by Standard & Poor's Monday. The slump has driven BP's market value below US$100 billion for the first time since the Gulf of Mexico oil spill in 2010.

"It's very disappointing. We were expecting lower profit from upstream, but not a loss," Ahmed Ben Salem, oil and gas analyst at Oddo & Cie in Paris, said by phone. "The dividend payout is probably safe for this year, but if oil stays around US$30 then they would have to cut capex further."

Profit has been lower year-on-year for six consecutive quarters as oil prices tumbled. The average price of benchmark Brent crude slumped 42 per cent in the fourth quarter from a year earlier to US$44.69 a barrel, the lowest since 2004.

PetroChina Co said last week it expects 2015 profit to fall at least 60 per cent. Chevron Corp. on Friday reported its first quarterly loss since 2002, while Royal Dutch Shell Plc said last month that fourth-quarter profit is likely to drop at least 42 per cent. The European oil major is scheduled to report full earnings on Thursday.

BP started cutting costs and selling assets following the 2010 oil spill. In October, it lowered its 2015 capital-spending forecast to about US$19 billion after investing about US$23 billion in 2014. The company said then it expects to spend US$17 billion to US$19 billion a year through 2017.

The company's ratio of net debt to equity jumped to 21.6 per cent at the end of 2015, an increase of almost five per centage points from a year earlier. BP maintained its quarterly dividend at 10 cents a share and reiterated its commitment to sustain it throughout the downturn.

BP posted a net loss of US$3.31 billion, reflecting one-time charges in its exploration and production unit and US$450 million of restructuring costs. That compared with a loss of US$4.41 billion in the fourth quarter of 2014.

BP's shares have increased 3.7 per cent this year following last year's 14 per cent decline. It's the best performer on the eight-member FTSE 350 Oil & Gas Producers Index after BG Group Plc.

BLOOMBERG