We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

BP - Production and prices make for slick results

Nicholas Hyett | 5 February 2019 | A A A
BP - Production and prices make for slick results

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

BP Plc Ordinary US$0.25

Sell: 349.45 | Buy: 349.55 | Change 8.65 (2.54%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

BP saw full year underlying profits more than double year-on-year to $12.7bn, with results improving across all divisions. That reflects a significant improvement in oil prices and slight uplift in production.

The fourth quarter dividend of 10.25 cents was 2.5% higher than last year.

The shares rose 3.6% in early trading.

View the latest share price and how to deal

Our view

BP has spent the best part of a decade addressing big problems, with first the Gulf of Mexico disaster and then the oil price crash throwing the group into disarray. But those events are slowly moving from newspaper pages to history books.

Deepwater Horizon payments are still soaking up mind boggling sums, $3.2bn last year, but are finally starting to shrink. New oil fields are coming online, with the extra production supporting cash generation in Upstream. Meanwhile the Downstream business, which has been BP's rock throughout much of the oil downturn, continues to deliver excellent results.

With profits now firmly back in positive territory, the focus has turned to cash.

Cash is the money companies actually have in the bank to service debts, invest in growth and pay dividends. BP reckons it can match its cash in to cash out with oil at $50 a barrel, and with oil comfortably above that for most of the last year, that gives it options.

The share buyback programme was the first bone for investors, offsetting a scrip dividend which has been very dilutive, and saw the company issue $1.7bn of shares in lieu of cash dividends in 2017. A return to dividend growth, albeit modest, is the second, with the shares currently offering a prospective yield of 6%.

The group's also flexing its financial muscles in M&A, with the acquisition of a huge shale portfolio from BHP. An existing US onshore business, in which it has achieved some impressive cost savings, should give BP the expertise and opportunity to achieve $350m in planned cost and revenue synergies.

The deal means the balance sheet's still a bit stretched, so investors should still have one eye on the oil price. But as things stand BP looks in good shape, and the combination of organic growth and disposals means there's scope for substantial returns to shareholders.

Register for updates on BP

Full Year Results

Upstream production rose 3% year-on-year to 2.5m barrels a day. That reflects major new projects in the North Sea, Egypt, Russia, Azerbaijan, the Gulf of Mexico and Australia.

Combined with a 22.9% increase in average oil & gas prices that led to a 148% increase with underlying upstream profits, which reached $14.6bn.

Underlying Downstream profits rose 8.5% to $7.6bn, including a record fourth quarter. The Fuels division was the main driver of success, benefitting from enhanced convenience offerings across the petrol station network, while the roll-out of Mexican retail sites is also continuing at pace.

The Lubricants divisions slightly underperformed last year, as rising oil prices dragged on performance, while Petrochemical's saw margins improve.

BP's Rosneft stake delivered an underlying profit of $2.3bn, a 177% increase year-on-year driven largely by higher oil prices.

Total capital expenditure rose 40.6% year-on-year to $25.1bn, following the purchase of BHP Group's US onshore assets. Excluding M&A activity, capital expenditure fell 8.2% year-on-year.

BP completed $3.5bn in divestments during the year, and intends to complete a further $10bn over the next 2 years to help fund the BHP acquisition.

Next debt at the year end stood at $44.1bn, 16.7% ahead of the year before, with a gearing ratio of 30.3%. That's slightly above the group's 20-30% target, but is expected to return to the middle of that range by 2020 thanks to organic free cash flow and disposal proceeds.

Find out more about BP shares including how to invest

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.