BP bounces back from 2016 with $3.4B profit in 2017

  • BP Alaska President Janet Weiss speaks at the Alaska Support Industry Alliance “Meet Alaska” event on Jan. 19 to tout the company’s performance at Prudhoe Bay over the past three years. (Photo for the Journal by Michael Dinneen)

While BP Alaska leaders are celebrating the success of stemming production decline from the aging Prudhoe Bay oil field despite belt-tightening in the industry, the company’s global executives on Feb. 6 celebrated the announcement of a $3.4 billion profit in 2017.

The $3.4 billion in earnings last year comes after the London-based oil super major managed to net just $115 million in 2016. The entire industry was boosted by a gradual return to oil prices of about $70 per barrel by the end of the year, but the fact that BP’s settlement payments related to the 2010 Deepwater Horizon oil spill have started to shrink also helped the company.

It paid out $6.9 billion in spill payments in 2016 and $5.2 billion in 2017, according to the fourth quarter earnings report released Feb. 6.

“2017 was one of the strongest years in BP’s recent memory,” CEO Bob Dudley said in a formal statement. “We delivered operationally and financially, with very strong earnings in the downstream; upstream production was up 12 percent; and our finances rebalanced. And we did all this while maintaining safe and reliable operations.”

However, the company netted just $27 million in the fourth quarter after a $1.7 billion profit in the third quarter. That was primarily due to non-operating expenses accounted for in the quarter, according to the report.

Operating cash flow — excluding the Deepwater Horizon payments — was up substantially from $17.6 billion in 2016 to $24.1 billion last year. Operating cash flow for the quarter was $6.4 billion, up 42 percent year-over-year.

In Alaska, the year was more mixed for BP.

The company held Prudhoe oil production at roughly 280,000 barrels per day for the third straight year, which Chief Upstream Executive Bernard Looney called “a fantastic example” of the BP’s ability to optimize work while cutting drilling during a time of low prices during a conference call with investors.

Looney further noted the progress the Alaska Gasline Development Corp. has made on the $43 billion Alaska LNG project, which would begin selling the roughly 35 trillion cubic feet of natural gas combined at Prudhoe Bay and Point Thomson. BP executives have said the North Slope gas reserves are the company’s largest non-producing asset in its portfolio.

“In Alaska, the fiscal changes potentially around what has been achieved with the Trump administration around gas, which many people might have thought of as a big stranded asset, may actually come to light in terms of commerciality,” Looney said.

In November, AGDC and Gov. Bill Walker signed a nonbinding agreement with three large Chinese companies to advance the gas project in front of President Donald Trump and China President Xi Jinping in Beijing. BP has also assisted AGDC in a behind-the-scenes role on the Alaska LNG Project since the state-owned corporation took it over at the start of 2017.

While Dudley touted the BP’s safe operations in 2017, the company allegedly had near misses in Alaska during the year that pushed its state leaders to call for a “reset” of its safety culture in the state. Buzzfeed reported in October, based on leaked internal BP Alaska emails, that the company had at least five incidents during the year that put employees at significant risk and resulted in workers being sent to unscheduled safety training.

Also, in April, a BP oil well failed at Prudhoe due to permafrost melting around the well, spraying about 100 gallons of oil onto the drilling pad. The incident caused the company to review all of its wells for a similar design — a few were found and shut in — and pushed state regulators to require all Slope operators to perform a similar review late in the year.

BP’s Alaska-specific financials are reported each year in the company’s annual report, which is expected to be published in late March.

Elwood Brehmer can be reached at [email protected].

02/07/2018 - 10:52am