BP has joined its big-oil peers by giving investors a positive surprise, exceeding profit estimates and earning better returns than its closest European rival.
Its shares surged by the most in almost three years.
New projects delivered an increase in oil and gas output, while the company also worked its existing fields and refineries more efficiently than ever. That helped offset the impact of a slump in crude prices in the fourth quarter. The better-than- expected earnings should give shareholders some comfort after BP took on more debt to pay for a swathe of US shale assets, its biggest deal in 20 years.
The company’s facilities were still able to churn out cash even as the oil market turned south late last year.
While higher leverage gives BP less flexibility than its peers should the commodities cycle worsen again, so far prices have rebounded swiftly this year. Its willingness to spend money delivered six major new projects in 2018, increasing oil and gas output 2.4% to 3.683 million barrels of oil equivalent a day, the first of several years of forecast growth.
“It’s been a good quarter, it’s been a good year. The best year on safety, which means reliable operations, which leads to good financial results,” said chief executive Bob Dudley.
Investors seemed to agree, sending BP shares up to 5.5% higher, the biggest intraday jump since February 2016.
The UK oil major said adjusted net income was $3.48bn (€3bn) in the fourth quarter, beating analyst estimates of $2.64bn. Profit for the full year was $12.7bn, as high as when oil was trading close to $100 a barrel.
Upstream facilities, such as oil platforms, ran with record reliability of 96%, the company said. Return on average capital employed was 11.2% last year, up from 5.8% in 2017. Royal Dutch Shell’s comparable number was 7.6%.
Refining throughput was also the highest ever and continued to benefit from access to relatively cheap crude in north America.
BP said its downstream business had a record fourth quarter, while the unit’s full-year underlying earnings before interest and tax were $7.56bn. That beat even 2015, when a slump in crude prices delivered a stellar year for global refining and trading.
BP faces a trickier task balancing output growth with financial discipline than some of its peers. It is still recovering from the 2010 Deepwater Horizon catastrophe, which killed 11 people and cost it more than $60bn in penalties and compensation. Payments for the disaster are ongoing, but winding down. They reached $3.2bn in 2018 and are likely to fall to $2bn this year.