Sunshine and Showers

Sunshine and Showers

max temp: 8°C

min temp: 3°C

Search

BP profits set to surge as oil prices and declining costs drive growth

PUBLISHED: 08:38 05 February 2018 | UPDATED: 08:38 05 February 2018

Profits are expected to surge at BP

Profits are expected to surge at BP

Archant

BP is expected to reveal a surge in annual profit next week, as higher crude prices and declining costs drive the oil giant’s recovery.

A tanker refuels a BP forecourtA tanker refuels a BP forecourt

The company is forecast to have raked in around 6 billion US dollars (£4.2 billion) in underlying replacement cost profit - BP’s preferred income measure - in 2017, a notable improvement on the 2.6 billion US dollars (£1.8 billion) reported in 2016.

That figure is based on consensus forecasts for 1.9 billion US dollars (£1.3 billion) in underlying fourth quarter profits, on top of the 4.1 billion US dollars (£2.9 billion) booked in the first nine months of the year.

There is also potential for BP to swing to a profit on the replacement cost profit measure alone, which in 2016 showed a loss of 999 million US dollars (£702 million).

BP is among a string of oil majors benefiting from climbing oil prices, having seen Brent crude hit 70 US dollars per barrel last month - its highest level in more than three years.

The global oil benchmark slipped below 30 US dollars per barrel as recently as 2016 as weaker demand and a global energy glut driven by the rise of shale gas took their toll.

The company’s own share price has recovered broadly in line with global energy prices, having jumped from 290p per share in January 2016 to where they sit at around 501p today.

But Nicholas Hyett, equity analyst at Hargreaves Lansdown, said other factors were at play, such as declining costs linked to the Deepwater Horizon disaster.

He said: “Fortunately BP’s recent performance isn’t driven solely by a more favourable oil price environment.

“Although costs relating to the Deepwater Horizon oil spill are set to be higher than originally expected this year, at 3 billion US dollars (£2.1 billion) rather than 2 billion US dollars (£1.4 billion), charges for the disaster are finally starting to decline.

“That should free up significant cash flow for reinvestment and debt reduction.”

Last month the oil giant announced that it would book another 1.7 billion US dollar (£1.2 billion) charge from the 2010 oil spill - which killed 11 rig workers and led to millions of gallons of oil being spewed into the Gulf of Mexico - but assured that the lengthy settlement process for the mammoth claims related to the spill is now winding down.

“The group has been ramping up production in line with the oil price recovery, turbo charging revenues.

“At the same time costs have been falling significantly. Put all that together and the group felt confident enough to launch a share buyback scheme in October to offset the dilutive effect of its scrip dividend programme,” Mr Hyett said.

“With conditions improving we expect the Upstream division, which drills for and pumps oil & gas, to take centre stage on Tuesday.

“Key numbers to look out for are production and cost figures, while guidance on Deepwater charges and exploration spending could also move the needle.”

Search hundreds of local jobs at Jobs24

One in three Britons have suffered from mental health problems in the workplace, but companies are often reluctant to admit it’s an issue in their company.

The latest research by Historic England shows that tourism is booming in the East of England, with the number of day visits almost doubling from 10m in 2012 to 18m in 2016.

Suffolk’s Kingsfleet Wealth appear as one of the experts in The Parliamentary Review 2018, featuring alongside Prime Minister Theresa May, journalist and broadcaster Andrew Neil, plus a group of ministers and leading officials from a variety of organisations and industry.

A housebuilder operating across Suffolk, Essex, Norfolk and Cambridgeshire has contributed more than £85.9m to the UK’s economic output in the past year, according to a report.

Carpetright is considering further changes to its store portfolio across East Anglia as it handles stinging losses.

Management Jobs

Show Job Lists

Most read

Topic pages

Newsletter Sign Up

Sign up to the following newsletters:

Sign up to receive our regular email newsletter

Our Privacy Policy

MyDate24 MyPhotos24