Published: Wed, February 08, 2017
Economy | By Melissa Porter

BP swings to profit but pricing environment remains a threat

BP swings to profit but pricing environment remains a threat

In addition, the company reported its underlying replacement cost profits of $400 million for the fourth quarter of 2016, increasing from $196 million in the same period a year ago.

BP continues to pull away from the financial liabilities of the Deepwater Horizon disaster, although the oil giant's fourth quarter profits fell short of what analysts and investors had hoped for.

BP said oil prices remained "challenging" in 2016, with the average for Brent crude standing at 44 U.S. dollars a barrel - the lowest for 12 years.

BP has disappointed investors with a lacklustre fourth quarter, saying that it would need oil prices to reach about $60 a barrel in order to balance its books this year.

BP chief executive Bob Dudley said: "We have delivered solid results in tough conditions - and are well prepared for any volatility in oil pricing".

BP has been slashing costs in the face of weak oil global oil prices and sliding refining margins.

"BP continues to pay out a quarterly dividend of 10 cents, which works out at an annual yield of nearly 7 percent. Everything we have done during the year has made us a more resilient and competitive company", he added. BP shares in London were down about 2.7 per cent at 463.55 pence.

Its figures come after rival Royal Dutch Shell also reported back on a lacklustre fourth quarter last week, which dragged its annual profits down by 8%.

The company has already been forced to sell billions of dollars' worth of asset since the deadly Deepwater Horizon rig explosion in the Gulf of Mexico in 2010.

BP's 10 per cent share of the concession's output, which is on track to increase from 1.6 million barrels per day (bpd) to 1.7 million bpd by next year, will add significantly to its average daily oil volume of about 1.2 million bpd and comes at a time when benchmark oil prices are holding in the mid-$50s. That takes the total Gulf payouts to $62.6 billion.

The company's underlying net cash generation tumbled 13% previous year compared with 2015, hammered by the weak market.

Although BP shares are now down nearly 9% so far this year, the stock is still up around 40% over the calendar year having been driven higher by a strong recovery in crude prices in the fourth-quarter following output cuts led by oil cartel OPEC. Underlying cash from operations in the fourth quarter fell almost 24% compared with the same period a year earlier.

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