In a year in which the company recorded a $9.8bn charge to settle US claims related to the Deepwater Horizon disaster, the oil slump — which has been likened to the severe downturn of 1986 — sent BP to a record loss of $5.2bn for 2015 on a replacement cost basis, from an $8.1bn profit in 2014.
By contrast, ExxonMobil, the US oil company long rumoured as a possible bidder for BP, put in a resilient performance.
It reported a smaller decline in earnings than competitors including Chevron. Net income for the fourth quarter came to $2.8bn, down 58 per cent compared to one year earlier but above analysts’ expectations. Exxon recorded full-year net profit of $16.2bn, down 50 per cent. BP laid bare the impact of the steep drop in the price of Brent crude, which has battered revenue and profit across the energy industry — leading to fears that dividends will be cut. It outlined about 7,000 job losses across the group over the next two years.
As Brent fell 4 per cent to trade at $32 a barrel on Tuesday, hit by concerns over waning global economic growth, BP’s shares tumbled as much as 10 per cent before recovering to 335.1p, but are still down almost a quarter compared to a year ago.
Analysts called BP’s 91 per cent slide in underlying fourth-quarter profit, to $196m, “very poor” and “disappointing”. The performance fell well short of their expectations of $730m.
Including writedowns to its North Sea fields, where high costs and the oil price collapse have rendered much of the basin unprofitable, BP’s fourth-quarter loss was $2.2bn, compared with $969m during the same period in 2014.
Bob Dudley, chief executive, voiced “surprise” at the market reaction and sought to allay fears over future dividend payouts, insisting that these would be maintained. He said that this year would be “turbulent” but oil prices would recover.
“It’s lower for longer, not lower forever,” Mr Dudley told reporters of the recent fall in Brent to 12-year lows below $30 a barrel.
“Global supply is levelling off, particularly in the US,” he said, adding that supply and demand would “come into balance sometime in the third quarter”.
The industry is trying to cut costs amid a US supply glut, weaker demand in China and Opec’s decision not to cut output.
BP was the first big European oil company to detail the effects of the sustained fall in crude, and its heavy loss highlights the acute pressure that energy companies are under.
Brent crude averaged $44 a barrel in the final quarter of 2015, above current levels, suggesting that the first three months of 2016 could be worse.
Mr Dudley held back from making deeper reductions to capital spending, announcing instead a further 3,000 job losses at BP’s downstream business.
“We are continuing to move rapidly to adapt and rebalance BP for the changing environment,” he said.
Iain Reid, analyst at Macquarie Securities, said that BP’s 91 per cent decline in underlying earnings, versus a fall of about 50 per cent announced by Royal Dutch Shell in a trading update two weeks ago, “will probably be the poorest of the majors in this reporting season”.
Exploration write-offs to the Gila discovery in the Gulf of Mexico hit BP’s underlying performance as well as the fall in crude, sending the upstream business to a $728m loss in the fourth quarter.
But the group showed the resilience of the integrated oil company model — where refining operations can act as a hedge against lower crude prices. Its downstream business, while falling short of analysts’ expectations in the fourth quarter, reported a record profit of $7.5bn for the full year.
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