BP delivers '˜solid' results in tough conditions

The group clawed its way out of the red in the fourth quarter, with profits of 72 million US dollars (£58 million) against losses of 2.2 billion US dollars (£1.8 billion) a year earlier.

This helped annual losses improve from the mammoth 5.2 billion US dollars (£4.2 billion) 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 2.59 billion US dollars (£2.1 billion) from 5.91 billion US dollars (£4.8 billion) 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 400 million US dollars (£322 million) in the fourth quarter from 196 million US dollars (£158 million) a year earlier.

But this was lower than City forecasts for around 560 million US dollars (£450 million).

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 to 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 2% 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%.

BP added that the total bill for the 2010 Deepwater Horizon oil spill in the Gulf of Mexico had surged to 62.6 billion US dollars (£50.4 billion), with another 625 million US dollar (£504 million) charge taken in the fourth quarter.

The group said compensation and settlements payments this year are set to be lower at around 4.5 billion US dollars (£3.5 billion) to 5.5 billion US dollars (£4.4 billion), before falling sharply to around 2 billion US dollars (£1.6 billion) in 2018 and to a little over 1 billion US dollars (£806 million) 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 recent acquisitions, snapping up Australian gas stations at the end of last year and striking a deal to take a 10% stake in Abu Dhabi Company, giving it access to the emirate’s largest oilfields.