BP Avoids Q4 Loss on Russian Gains: Update
BP remained in the black in the fourth quarter, despite weaker profits at its main upstream and downstream businesses, thanks to a surge in earnings from its 19.75% stake in Russian oil giant Rosneft and lower underlying tax charges.
The company's underlying replacement cost (RC) profit, which it uses as a proxy for net profit, came to $115mn in the Q4 2020, up from $86mn in the previous three months but down from $2.57bn in Q4 2019, it said on February 2. BP booked a full-year loss of $5.7bn versus $10bn in profits in 2019.
BP's RC profit before interest and tax for downstream operations in Q4 slumped to $126mn from $636mn in Q3, owing to the impact of coronavirus (Covid-19) restrictions on fuel demand. Many countries reintroduced lockdown measures in November and December in response to a resurgence of Covid-19 cases. The performance of BP's gas marketing and trading business was also weaker, it said.
Upstream, income dropped to $697mn in Q4 from $878mn three months earlier. Production averaged 2.155mn barrels of oil equivalent/day in Q4, versus 2.24mn boed/d in the previous quarter and 2.7mn boe/d in the final quarter of 2019. Gas extraction came to 6.01bn ft3/d in Q4.
BP was supported by a surge in earnings from its 19.75% stake in Russian oil giant Rosneft to $311mn, from a loss of $177mn in the previous three months. Losses from BP's other businesses and corporate activities narrowed to $89mn from $130mn.
BP has shed billions of dollars of assets over the past year, most recently closing the $5bn sale of its petrochemicals business to the UK's Ineos at the end of last year. It has also agreed to sell part of its interest in Oman's onshore Block 61 to Thailand's PTTEP for $2.6bn. BP was able to lower its net debt to $39bn at the end of December, down $1.4bn from three months ago and down $6.5bn from a year ago.
The company warned that net debt would increase again in the first half of 2021 owing to severance payments. But CFO Murray Auchincloss noted that the group was still "on track to meet [its] target of $35bn between the fourth quarter of 2021 and first quarter of 2022, which will trigger the start of share buybacks, subject to maintaining a strong investment grade credit rating."
BP's divestments are also aimed at shifting the company's focus to renewables and other new clean technologies and away from oil and gas, under a strategy announced by CEO Bernard Looney last year. It aim to sell $25bn of assets by 2025, using the proceeds to invest more in renewables and achieve a 40% cut in oil and gas production by 2030.