Oil giant BP remained in the red with losses of 999m US dollars (£803m) in 2016, but revealed a year-end boost as crude prices bounced back.
The group clawed its way out of the red in the fourth quarter, with profits of 72m US dollars (£58m) against losses of 2.2bn US dollars (£1.8bn) a year earlier. This helped annual losses improve from the mammoth 5.2bn US dollars (£4.2bn) loss posted in 2015, which was its worst result for at least 20 years. On an underlying basis, BP saw profits more than halve in 2016 to 2.59bn US dollars (£2.1bn) from 5.91bn US dollars (£4.8bn) the previous year.
BP said oil prices remained “challenging” in 2016, with the average for Brent crude standing at 44 US dollars a barrel - the lowest for 12 years.
Recent higher oil prices, which have recovered above 50 US dollars a barrel, helped underlying replacement cost profits more than double to 400m US dollars (£322m) in the fourth quarter from 196m US dollars (£158m) a year earlier.
But this was lower than City forecasts for around 560m US dollars (£450m). The group said it expected to balance its books at an oil price of around 60 US dollars a barrel by the end of 2017 and hopes production will rise this year, although it cautioned over the impact of Opec’s decision to cut production.
Bob Dudley, BP group chief executive, said: “We have delivered solid results in tough conditions - and are well prepared for any volatility in oil pricing.”
Shares fell on the fourth-quarter earnings disappointment.
BP said the benefits of the higher oil prices were offset by weaker refining margins in the quarter. The 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 per cent. BP added that the total bill for the 2010 Deepwater Horizon oil spill in the Gulf of Mexico had surged to 62.6bn US dollars (£50.4bn), with another 625m US dollar (£504m) charge taken in the fourth quarter. The group said compensation and settlements payments this year are set to be lower at around 4.5bn US dollars (£3.5bn) to 5.5bn US dollars (£4.4bn), before falling sharply to around 2bn US dollars (£1.6bn) in 2018 and to a little over 1bn US dollars (£806m) a year from 2019.
Mr Dudley said with the costs of the Deepwater tragedy “substantially behind us”, the group is “fully focused on the future”.
He added: “We start this year with considerable momentum - and a sense of disciplined ambition. We have laid the foundations for BP to be back to growth.”
BP has been slashing costs in the face of weak oil global oil prices and sliding refining margins. But the group has been making acquisitions, snapping up Australian gas stations at the end of last year.
Ken Odeluga, a market analyst at City Index, said: “BP has produced a small figurative quarterly profit ($72m) for the fourth quarter, as widely forecast.
“This should, to a degree, offset the impact of a number of negative surprises.”
However, Mr Odeluga also said that lower production and continuing bouts of low visibility over the group’s marginal expenses will compound investor uncertainties.
The Gulf of Mexico oil spill continues to cast a long shadow on BP’s financial performance, although the company expects this to diminish significantly over the next few years, said Laith Khalaf, a senior analyst at Hargreaves Lansdown:
Mr Khalaf added in a share research note: “The pricing environment remains challenging for the oil majors, and while things are looking better than they did a year ago, we’re still a long way short of those halcyon days when oil traded at over $100 a barrel.”