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Energy giant dips

Lower oil and gas prices hit BP profits as Dudley steps down


Lower prices at the pumps

BP saw its fourth quarter profits fall by 26%, reflecting weaker global oil and gas prices.

Underlying replacement cost profit for the fourth quarter was $2.6 billion against $3.5bn last time, but higher than a forecast of $2.1bn.

The full year came in at $10bn compared to $12.7bn a year earlier.

Despite the fall, the company has boosted its quarterly dividend payout by 2.4% to 10.5 cents per ordinary share ($0.63 per ADS). The corresponding amount in sterling will be announced on 16 March.

BP expects full year production to be lower than 2019 due to declines in lower margin gas basins and the impact of the ongoing divestment programme.

The figures are the last reported by Bob Dudley who is replaced as chief executive by Bernard Looney.

Mr Dudley announced he would step down as CEO having held the position for almost a decade. The 64-year-old will retire on 31 March, bringing an end to his 40-year career with BP.

Anglo-Dutch energy giant Royal Dutch Shell last week reported a sharp fall in full-year net profit, while US rivals Chevron and Exxon Mobil both missed analyst expectations on Friday.

International benchmark Brent crude traded at $54.88 Tuesday morning, up more than 0.8%, while U.S. West Texas Intermediate (WTI) stood at $50.63, around 1% higher.

Both crude benchmarks have each fallen around 20% since climbing to a peak in early January, dragged lower by concern over demand in China after the coronavirus outbreak.

Market reaction

Russ Mould, investment director at AJ Bell, said: “After nearly a decade in charge, BP CEO Bob Dudley bows out in a decent fashion with today’s fourth quarter and full year results.

“Dudley has received plaudits for the repair job he conducted at the oil major in the wake of the Gulf of Mexico oil spill and his will be big shoes to fill.

“Fourth quarter profit was down sharply but this was to be expected given the recent pressure on oil prices. And, not for the first time in recent years, the company still outmatched expectations while also hiking the dividend.

“This is testament to the streamlined and well-oiled machine which Dudley has successfully turned the company into.

“The sell-off in oil, linked to the impact of China’s coronavirus, has somewhat spoiled Dudley’s card although he still delivered a respectable 60%-plus total return for investors over his tenure despite a lot of background volatility.

“One area where Dudley has drawn criticism is climate change and this is an issue on which his successor Bernard Looney is likely to face increasing pressure.

“A key focus is whether BP should be responsible for its own emissions or for indirect emissions caused by consumption of its oil and gas.

“This is likely to contribute to the particularly testing job which Looney faces, which arguably rivals the one Dudley faced when he took charge at the company’s moment of crisis in 2010.”

Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said: “BP’s results have come in slightly better than expected, but they are still a reflection of the challenging environment for oil and gas companies – the effect of which we also saw with Royal Dutch Shell’s update last week.

“Debt levels are a concern for now, remaining as they do above the 30% mark. However, there are some positives to be taken from the update including the progress of BP’s divestment programme, an increase in production, good reliability, and greater diversification.”

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