BP PLC’s earnings last quarter fell short of expectations as COVID-19 restrictions continued to hurt fuel sales and refining profit margins.
The Western world’s largest oil and gas producers were supposed to be sailing into earnings season with a tailwind from stronger commodity prices, but their results so far show the wounds of last year’s historic slump have not healed.
BP eked out a modest profit, but it was still just a fraction of typical pre-COVID-19 pandemic levels, while cashflow was down.
Chevron Corp, the only other major so far to post its results for the period, underscored the industry’s enduring woes with a surprise loss due to weak fuel demand.
“Road and air travel are down, as are oil demand, prices and margins,” BP chief executive officer Bernard Looney said in a statement yesterday.
“We expect much better days ahead for all of us in 2021,” Looney said.
BP’s fourth-quarter adjusted net income was US$115 million, down from US$2.57 billion a year earlier and only a slight improvement from the preceding three months.
The company fell short of the average analyst estimate of US$440 million.
Operating cash flow, excluding Gulf of Mexico spill payments, a key figure for investors, as it determines the sustainability of dividend payments and capital expenditure, was much weaker. It fell to US$2.4 billion in the period, down from US$5.4 billion in the third quarter last year.
Refining weighed down the company’s performance.
BP said that its refining business was affected “significantly” by lower volumes as a result of the pandemic, with continuing pressure on margins.
Gas marketing and trading were also weak.
One bright spot was net debt, which was down US$1.4 billion from the preceding quarter to US$39 billion at year-end.
Still, BP said that it expects the figure to increase in the first half of this year, driven by payments related to employee severance, the annual Gulf of Mexico oil spill compensation, and the completion of the offshore wind joint venture with Equinor ASA.
The ratio of net debt to equity was 31 percent.
“These results reflect a truly tough quarter,” BP chief financial officer Murray Auchincloss said.
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