Collapse in profits for BP

BP to announce 70% collapse in profits

Figures likely to be even worse after energy firm factors in writedowns and one-off charges as slump in oil price takes its toll

theGuardian

31 January, 2016

BP is expected to announce a near 70% collapse in underlying profits on Tuesday as low oil prices continue to take their toll.

The headline figures will be even worse once one-off charges are included.

City energy analysts predict the British oil company will report that earnings in the last quarter of 2015 fell to $730m (£514m), from $2.2bn a year earlier.

Oilslump - the true cost of falling prices

Brent crude fell the last quarter from around $77 a barrel to $44, a 43% fall, but the BP results have also been hit by other factors.

Despite the problems, analysts at Barclays Capital said BP was already doing well to cut its costs and could easily further trim them if the price of oil, currently at $34, were to remain close to $40.

“BP could respond by reducing [capital expenditure] by a further 20% to $14bn, which would allow management to balance the books by 2018 with the current level of dividend maintained,” said Barclays in an investment note.

BP said it was aware of the forecasts but declined to comment further.

Meanwhile Shell, which reports its fourth-quarter results on Thursday, warned in a trading statement last week that its underlying profits could be halved.

Shell, which has just received the go-ahead from shareholders for a £35bn takeover of rival BG, is expecting to make additional write-offs of up to £5bn.

Concerns about the damage being done to Britain’s oil and gas industry has led the British prime minister, David Cameron, to pledge £250m to Aberdeen. About 70,000 jobs direct and indirect jobs have been lost around the UK due to the crude price slump.

Shell has already promised to cut 10,500 more jobs worldwide once the BG deal is consummated on 15 February. Some job cuts could come in Aberdeen.

Meanwhile, hopes were raised last week that Russia and Saudi Arabia may agreeat a meeting next month to hold back oil production in an attempt to push up energy prices.