British oil major BP returned to profit during the last quarter of 2016 helped by higher oil prices and lower costs.
The company reported on Tuesday that its fourth-quarter 2016 replacement cost (RC) profit was $72 million, compared with a loss of $2.233 billion for the same period in 2015.
After adjusting for a net charge for non-operating items of $180 million and net unfavorable fair value accounting effects of $148 million (both on a post-tax basis), underlying RC profit for the fourth quarter was $400 million, compared with $196 million for the same period in 2015.
BP said that, compared to a year earlier, the quarter’s result benefited from higher oil prices and significantly lower costs, offset by weaker refining margins and higher turnarounds in the Downstream.
The full year 2016 price environment was challenging: the average Brent oil price of $44 per barrel was the lowest for 12 years; Henry Hub gas marker prices averaged $2.46 per million British thermal units; and the refining marker margin was the lowest since 2010, the company said.
Underlying operating cash flow, excluding pre-tax Gulf of Mexico payments, was $17.8 billion for 2016, with $4.5 billion in the fourth quarter, compared with $20.3 billion in 2015.
Net debt at December 31, 2016 was $35.5 billion, compared with $27.2 billion a year ago.
Reported production for the fourth quarter, including BP’s share of Rosneft’s production, was 3,338 thousand barrels of oil equivalent per day (mboe/d), compared with 3,342 mboe/d for the same period in 2015.
Bob Dudley, BP group chief executive, commented: “We have adapted by cutting our controllable cash costs by $7 billion from 2014 – a full year earlier than planned. Continued tight discipline on costs remains essential. Everything we have done during the year has made us a more resilient and competitive company.
“With our Deepwater Horizon financial liabilities now substantially behind us, BP is fully focused on the future. You have seen that focus in the string of strategic portfolio additions during the last two months of the year. From increasing gas interests and renewing long-term low-cost oil to expanding our retail operations – these investments will generate significant long term value for our shareholders.”
Including estimated additional organic capital spending associated with the portfolio additions, BP’s organic capital expenditure is now expected to be $16-17 billion in 2017.