BP earnings disappoint as it cuts costs, investment

Oil producer BP’s earnings rose less than expected in the fourth quarter, as it sought to adapt to low energy prices with cost cuts, asset sales and a pullback in investment plans.

A key measure of net income, the underlying replacement cost profit, rose to $400 million from $196 million in the same period last year. That missed analyst forecasts for $540 million, as surveyed by data provider FactSet. The profit measure, which excludes fluctuations in the value of inventories, is the industry’s preferred gauge of earnings.

Shares in BP fell 2.6 per cent to 464.25 pence in London after the release of the figures.

Oil companies have been cutting costs and selling assets after oil prices plunged to 12-year lows in January of last year. Brent crude, the international benchmark, averaged about $44 a barrel last year, down from more than $100 as recently as September 2014. Brent traded at $55.87 a barrel on Monday in London.

“We have delivered solid results in tough conditions _ and are well prepared for any volatility in oil pricing,” CEO Bob Dudley said in a statement. “We have adapted by cutting our controllable cash costs by $7 billion from 2014 _ a full year earlier than planned.”

Net income for the quarter totalled $497 million, compared with a loss of $3.31 billion a year earlier.

Oil and gas production, excluding the contribution from BP’s stake in Russian oil company Rosneft, fell 5.5 per cent in the quarter to the equivalent of 2.2 million barrels a day. Including Rosneft, production was steady at 3.34 million barrels a day.

BP said it expects to reduce capital investment in the business to between $16 billion and $17 billion this year, from $19.5 billion in 2015. The company also plans to raise as much as $5.5 billion from the sale of assets this year, up from $3.2 billion in 2016.

The 2010 Deepwater Horizon disaster in the Gulf of Mexico continues to cost the company money, though Dudley said the biggest charges are likely behind it. BP took a fourth-quarter charge of $799 million for the spill, bringing total charges since the accident to $62.6 billion.