BP Plc reported a 91% decline in fourth-quarter earnings after average crude oil prices dropped to the lowest in more than a decade. The company’s shares fell the most since August.
Profit adjusted for one-time items and inventory changes totaled $196 million, the London-based company said on Tuesday.
That missed the $814.7 million average estimate of 10 analysts surveyed by Bloomberg. The net loss for the year was $6.5 billion, the most in at least 30 years.
While chief executive officer, Bob Dudley, has trimmed billions of dollars of spending, cut thousands of jobs and deferred projects in response to the plunge in crude prices, BP’s cash flow still does not cover spending and dividends.
The CEO said in an interview that he is re-tooling BP to balance cash flows at below $60 a barrel. The slump has driven BP’s market value below $100 billion for the first time since the Gulf of Mexico oil spill in 2010.
Profit has been lower year-on-year for six consecutive quarters as oil prices tumbled. The average price of benchmark Brent crude slumped 42% in the fourth quarter from a year earlier to $44.69 a barrel, the lowest since 2004.
Balancing the Books
BP’s shares on Tuesday slumped as much as 8.5% in London, giving it a market value of about $90 billion. The stock has declined 4.7% this year following last year’s 14% retreat.
It started cutting costs and selling assets following the 2010 oil spill. In October, it lowered its 2015 capital-spending forecast to about $19 billion after investing about $23 billion in 2014.
The company said then it expects to spend $17 billion to $19 billion a year through 2017.
The British major could reduce that further to $14 billion if oil averages about $40 a barrel, which would balance the books by 2018 while still maintaining dividends, Barclays Plc analyst Lydia Rainforth said.
Deductions for one-time costs, accounting effects and changes in the value of inventories pulled down the company’s bottom line to a full-year net loss that was almost double the $3.72 billion loss made in 2010. That year, BP took charges of more than $40 billion to cover the legal, operational and environmental costs of the Gulf of Mexico oil spill.
Job Cuts
BP, which earlier said it plans to reduce its oil and gas exploration and production workforce by 4,000 people this year, will also cut 3,000 jobs in downstream businesses by 2017.
The company’s adjusted loss from the upstream, which includes oil and gas exploration and production, was $728 million in the quarter, compared with a profit of $2.2 billion a year earlier.
Earnings from downstream, made up of refining, chemicals and trading, were $1.2 billion, similar to a year earlier and 48% lower than the preceding quarter.
BP expects refining margins in the first quarter of 2016 to be lower than the previous three months.
Refining countered declining profit from crude oil and natural gas sales for much of 2015 as demand stayed high.
A mild winter has curbed demand for some fuels, including heating oil, narrowing margins and putting further pressure on companies such as BP and Shell.
