BP
Plc
,
Europe
’s biggest oil company, expects the recovery from last year’s recession
to be “slow and gradual” as fourth-quarter earnings missed analyst estimates.
Earnings
excluding one-time items and gains or losses from inventories rose 68
percent to $4.38 billion from a year earlier. That missed the $4.7 billion
median estimate of 13 analysts surveyed by Bloomberg News. The shares fell the
most since March.
Chief Executive Officer
Tony
Hayward
, who beat last year’s
cost-cutting target and ramped up operations in the Gulf of Mexico to become
Europe’s leading
energy
producer, said
output
will be “slightly lower” in 2010. Refining margins will “remain
depressed” for the time being, he said.
“They have disappointed relative
to some reasonably high expectations,” said
Christopher
Wheaton
,
who manages about $400 million at Allianz RCM’s Energy Fund in
London
. “What’s really
disappointing is the refining business, which has struggled.”
BP, the first of Europe’s oil
majors to report earnings, will be followed by The Hague-based Shell in two
days.
Exxon
Mobil
Corp
.
,
the largest
U.S.
company, posted a fifth straight drop in quarterly profit yesterday to $6.05
billion.
Chevron
Corp
.
,
the second-largest
U.S.
energy company, reported a 37 percent drop in earnings to $3.07 billion.
‘Very Strong’
“Our operational performance in
the fourth quarter and through 2009 was very strong,” Hayward said in a
Bloomberg Television interview. “Refining margins in the fourth quarter were
the lowest for 15 years and, to date, BP is the only company that’s made any
money in the downstream business in the fourth quarter at all.”
Net
income
of $4.3 billion, or 23 cents a share, compared with a loss of $3.3
billion, or 18 cents a share, a year ago, London-based BP said in a statement.
Production rose 4 percent to 3.998
million barrels of oil equivalent a day in 2009, BP said. Output is expected to
be lower this year because of the absence of a “significant” hurricane season
in 2009. BP replaced its reserves by 129 percent last year, marking a 17th year
in which it found more resources than it extracted.
“We expect to see the demand for
oil rise by between 500,000 and perhaps 700,000-800,000 barrels a day in 2010,
reflecting a gradual restoration of global economic growth,” Hayward said in
today’s interview. Oil prices are likely to trade between $60 and $90 a barrel
during the next few years, he said.
Shares Drop
BP
fell
as much as 4.8 percent and traded 22 pence lower at 572.60 pence as of
9:45 a.m.
in
London
. The stock has risen 18 percent over the past 12 months, compared with
a 0.7 percent gain for Shell, which BP overtook in terms of market value last
month. The Dow Jones Europe Oil & Gas Index is up 19 percent.
Hayward said the company is
working to build its business selling fuel products in emerging markets to
countries outside the Organization for Economic Cooperation and Development.
“We are progressively moving capital
employed from the mature markets in the West to China and hopefully in the
future India,” he said. “At the moment, it’s probably about 15 percent of our
downstream business and I’d expect that to build over time.”
In 2010, BP expects the quarterly
loss, excluding non- operating items, for businesses such as alternative energy
and shipping to average around $400 million. The company’s adjusted loss
widened to $2.3 billion last year, from $1.2 billion in 2008, “primarily due to
a weaker margin environment for shipping and our BP solar business and adverse
foreign exchange effects.”
Refining Margins
BP’s Global Indicator Margin, a
broad measure of refining profitability, dropped to $1.49 per barrel in the
fourth quarter, the lowest level since the first quarter of 1995, according to
BP data.
“BP’s actual refining margin
declined even more than the indicator margin during this period,” BP said in
today’s statement.
BP
, already the
largest producer in the region, is aiming for a 50 percent increase in
production from the
Gulf of Mexico
after announcing a “giant” oil discovery at the
Tiber
prospect in
September.
The company said cash costs were
more than $4 billion lower in 2009, double an initial target.
BP will push “very hard” to bring
service industry costs down this year, Hayward said. “There’s still quite a lot
of overcapacity in the supply chain.”
BP is interested in acquiring
assets in Brazil and is working with China Petrochemical Corp. to expand in
Asia, Hayward said last week.
The company may invest about $15
billion with partners in Iraq as it seeks to boost crude output at the Rumaila
deposit. BP and China National Petroleum Corp. won a service contract in June
to develop Rumaila.