BP has reported its results for the full year and fourth quarter of 2015. Underlying replacement cost profit for the full year was US$5.9 billion, compared with US$12.1 billion reported for 2014, down 51%. The underlying result for the fourth quarter was USUS$196 million compared with USUS$2.2 billion for the fourth quarter of 2014.
Underlying operating cash flow for the fourth quarter of 2015 was US$5.9 billion, bringing the total for the year to US$20.3 billion, compared with US$32.8 billion for 2014, down 38%. BP took US$2.6 billion in non-operating post-tax charges in the fourth quarter, primarily related to impairments of Upstream assets as well as restructuring charges for the group. Including these charges and other offsetting effects, BP reported a replacement cost loss for the fourth quarter of 2015 of US$2.2 billion. BP also announced a dividend of US$0.10 per ordinary share for the quarter, payable in March. The dividend remains unchanged.
Despite strong operational performance and growing cost reductions, the lower underlying result was predominantly driven by the impact of steeply lower oil and gas prices on BP’s Upstream segment, which reported a pre-tax loss for the quarter. This was partially offset by a strong set of counter-cyclical results from the Downstream segment.
The Brent crude oil marker price averaged US$44/bbl in 4Q15 compared with US$77 a year earlier, and the average Henry Hub US gas marker price was US$2.27/million Btu compared with US$4.04 in 4Q14.
Bob Dudley, BP Group Chief Executive, commented: “We are continuing to move rapidly to adapt and rebalance BP for the changing environment. We’re making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment into the future of our portfolio.
“Our plans set out a clear course for BP for the medium term and will allow us to deliver growth in the longer term. All of this underpins our commitment to sustaining our dividend and then growing free cash flow and shareholder distributions over the long term.”
BP’s focus on cost discipline and increasing efficiency continues. Annual controllable cash costs in 2015 were US$3.4 billion lower than in 2014 and are on track to be close to US$7 billion lower in 2017. BP has now completed the US$10 billion divestment programme announced in October 2013 and plans a further US$3-5 billion during 2016.
Organic capital expenditure for 2015 was US$18.7 billion. BP expects annual organic capital expenditure to remain between US$17 and US$19 billion in 2016 and 2017 and to be at the lower end of that range in 2016.
“We will keep the capital frame under review as we move through 2016 and beyond,” said Brian Gilvary, BP Chief Financial Officer. “Should current conditions persist for longer than anticipated, we expect that all the actions we are taking will capture more deflation and so drive the point at which we balance our organic sources and uses of cash lower than the US$60/bbl that we indicated at last quarter’s results.”
BP ended the year with a gearing level of 21.6%. BP intends to continue to manage gearing with flexibility around the 20% level. BP has taken around US$1.5 billion in restructuring charges over the past five quarters; this total is expected to approach US$2.5 billion by the end of 2016. BP expects to reduce the number of staff and contractor roles in the Upstream segment by around 4000 during 2016 and by up to 3000 from the Downstream by the end of 2017.
Upstream and downstream operations
BP’s Upstream segment reported an underlying pre-tax replacement cost loss of US$0.7 billion for 4Q15 compared with a profit of US$2.2 billion a year earlier. This was mainly due to significantly lower oil and gas prices as well as lower gas marketing and trading results, offsetting lower costs including the benefits from simplification and efficiency activities.
The segment also reported non-operating net impairment losses of US$1.6 billion, following the further fall in oil and gas prices in the quarter and changes to other assumptions.
Overall Group production of oil and gas in the quarter averaged 3.4 million boe/d. Excluding Russia, reported production for the quarter was 8% higher than a year ago; after adjusting for entitlement and portfolio impacts, underlying production was 2% higher. BP also reported a reserves replacement ratio, excluding acquisitions and divestments, of 61% for 2015.
The Downstream segment reported an underlying pre-tax replacement cost profit for 4Q15 of US$1.2 billion, the same as that reported for 4Q14, with benefits from ongoing simplification programmes being offset by a weaker supply and trading result. Strong Downstream performance throughout the year meant that full year 2015 pre-tax earnings of US$7.5 billion were a record for the segment.
Estimated underlying net income from Rosneft was US$235 million, compared with US$470 million a year ago. Operations reliability has continued to be good throughout the group, with BP-operated plant reliability in the Upstream at 95% for the full year 2015 – compared with 86% in 2011 – and another quarter of strong refining operations, with Solomon availability of 95.5%.
BP continues to invest in a disciplined way to provide resilience and flexibility now and in the future. Its portfolio of businesses and opportunities is balanced geographically, in resource types, and across segments.
In the Upstream, during 2015 BP gained new access in Egypt and the Gulf of Mexico. It also extended its relationship with Rosneft in Russia, taking an interest in the TAAS venture and associated exploration opportunities in East and West Siberia. Three major upstream projects, one in Australia and two in Angola, began production in 2015 and another in Algeria is expected to start up shortly. BP took final investments decisions on four new major upstream projects during 2015, including the large West Nile Delta project in Egypt.
In the Downstream, BP continued to concentrate on advantaged assets, announcing the decision to divest the Decatur PTA plant in the US and to reorganise and simplify its refining interests in Germany.
A charge of US$443 million related to the Gulf of Mexico oil spill was taken in the quarter, primarily reflecting additional business economic loss claims. This takes the cumulative pre-tax charge for the incident to US$55.5 billion.
A court hearing to consider approval of the proposed consent decree in connection with the agreements in principle reached by BP Exploration & Production Inc. to settle all federal and state claims arising from the oil spill is scheduled for 23 March 2016.
Adapted from press release by Rosalie Starling
Read the article online at: https://www.hydrocarbonengineering.com/refining/02022016/bp-reports-on-2015-performance-2337/