BP report fall in fourth quarter and annual earnings

BP report fall in fourth quarter and annual earnings

BP plc (LON:BP) shares have jumped on Tuesday morning as the firm gave an update on their fourth quarter operations.

The oil and gas major reported a fall in fourth quarter and annual earnings, as both oil and gas prices remained volatile in the quarterly period.

Notably, this would be the last time Chief Executive Bob Dudley would be delivering the firms results after a long term with the firm.

Dudley commented:

“BP is performing well, with safe and reliable operations, continued strategic progress and strong cash delivery. This all supports our commitment to growing distributions to shareholders over the long term and the dividend rise we announced today. After almost ten years, this is now my last quarter as CEO. In that time, we have achieved a huge amount together and I am proud to be handing over a safer and stronger BP to Bernard and his team. I am confident that under their leadership, BP will continue to successfully navigate the rapidly-changing energy landscape.”

Looking at profit figures however, BP have managed to beat analyst and market expectations as the firm raised its annual dividend.

It seemed that shareholders remained optimistic, as shares spiked almost 5% on Tuesday morning.

Shares in BP trade at 473p (+4.48%). 4/2/20 10:29BST.

In the three month period to December 31, underlying replacement cost profit fell 26% year-on-year to $2.57 billion from $3.48 billion. For the full-year, it declined 21% to $9.99 billion from $12.72 billion.

Notably, the oil multinational saw revenues fall 6% to $71.11 billion from $75.68 billion in the fourth quarter, with 2019 revenue declining 6.8% to $278.40 billion from $298.76 billion.

BP made the market aware that they do not measure success on traditional profit lines, and rather tend to use RC which is replacement cost.

This is defined as the replacement cost of inventories sold in the period, this measure allows the firm to show shareholders that crude oil and derivatives can fluctuate in price, so the RC measurement gives consistency in results.

The company upped its fourth quarter dividend by 2.4% year-on-year to 10.5 cents.

Speaking on the dividend rise, Brian Gilvary Chief Financial Officer said

“We continue to make strong progress on our divestment programme, with announced transactions totalling $9.4 billion since the start of 2019. We are ahead of our target of $10 billion of proceeds by end-2020, and now plan a further $5 billion of agreed disposals by mid-2021. Net debt fell $1 billion in the fourth quarter, and with further disposal proceeds expected, and assuming recent average oil prices, we continue to expect gearing to move towards the middle of the 20 to 30% range through this year. Together with the continued strong operational momentum, growing free cash flow, and our confidence in delivery of 2021 free cash flow targets, this underpins our announcement today of an increase in the dividend to 10.5 cents per ordinary share.”

Pretax profit was down in the fourth quarter to $239 million from $249 million. Across the full-year period, it more than halved to $8.15 billion from $16.72 billion.

Looking at operating fees, BP saw impairment costs of $2.68 billion across the fourth quarter and on an annualized basis total impairment totaled $6.89 billion for 2019.

“The impairment charges, which are substantially all reported in the Upstream segment, principally relate to BP’s ongoing divestment program. They include $1.99 billion in the fourth quarter and $4,70 billion in the year relating to heritage BPX Energy assets. $258 million in the fourth quarter and the $1.26 billion in the year relating to the group’s interests in its Alaska business and $244 million in the year relating to the group’s interests in Gulf of Suez oil concessions in Egypt.”

Looking at output, BP noted that fourth quarter output did rise by 2.7% to 2.7 million barrels of oil equivalent per day, and for the full-year, climbed 3.8% to 2.6 million barrels of oil equivalent per day.

Speculating for 2020, BP commented:

“We expect full-year 2020 underlying production to be lower than 2019 due to declines in lower margin gas basins. We expect reported production to be lower due to the above factor and the impact of the ongoing divestment programme.
We expect first-quarter 2020 reported production to be lower than fourth-quarter 2019 due to the impact of our ongoing divestment programme and planned seasonal maintenance and turnaround activities.”

BP’s Third Quarter Results

The third quarter proved tough for BP, as the firm saw their results take a hit.

The company said that underlying replacement cost profit for the third quarter of the year amounted to $2.3 billion, considerably lower than the $3.8 billion figure recorded a year prior.

BP added that a divestment-related, non-cash, non-operating after-tax charge of $2.6 billion caused a reported loss of $700 million for the quarter.

“BP delivered strong operating cash flow and underlying earnings in a quarter that saw lower oil and gas prices and significant hurricane impacts,” Bob Dudley, Group Chief Executive, commented on the results.

BP are making ground, however the macroeconomic world has meant that oil and gas prices have been fluctuating, and this could be an important factor across 2020 for shareholders to consider.