BP sees ‘slow’ recovery as profit misses estimates
Oil firm BP said it 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 68pc to $4.38bn from a year earlier. That missed the $4.7bn 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 $400m 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 Shell in two days. Exxon Mobil, the largest US company, posted a fifth straight drop in quarterly profit yesterday to $6.05bn. Chevron, the second-largest US energy company, reported a 37pc drop in earnings to $3.07bn.
“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 $4.3bn compared with a loss of $3.3bn a year ago, London-based BP said in a statement.
Production rose 4pc 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 129pc 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.
BP fell as much as 4.8pc and traded 22 pence lower at 572.60 pence as of 9:45am in London.
The stock has risen 18pc over the past 12 months, compared with a 0.7pc gain for Shell, which BP overtook in terms of market value last month. The Dow Jones Europe Oil & Gas Index is up 19pc.
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 15pc 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 $400m.
The company’s adjusted loss widened to $2.3bn last year, from $1.2bn in 2008, “primarily due to a weaker margin environment for shipping and our BP solar business and adverse foreign exchange effects.”