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Oil price plunge halves BP profits

Published: 08:10 02 Feb 2016 GMT

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Steeply lower oil and gas prices mainly drove the lower underlying result

BP (LON:BP., NYSE:BP) blamed lower oil prices for a 51% fall in annual profit but kept its dividend unchanged at 10 cents a share.

The oil major said underlying replacement cost profit for the full year was US$5.9bn, compared with US$12.1bn for 2014.

Fourth quarter underlying results were US$196mln compared with US$2.2bn for the same period a year ago.

The group made an annual loss of US$5.2bn against profits of US$8.2bn a year ago, its worst for 20 years, according to analysts.

Hargreaves Lansdown's head of equity research, Steve Clayton, said: "BP hasn’t blinked on its dividend, but it is playing chicken with the oil price.

"BP’s dividend is a mile away from being covered by earnings and the market is saying this is unsustainable. They are a chasm away from their cash break-even oil price of around US$60 dollars per barrel."

BP said the impact of steeply lower oil and gas prices on its production arm, which reported a pre-tax loss for the quarter, mainly drove the lower underlying result, partly offset by strong counter-cyclical results in refining.

The Brent crude oil marker price averaged US$44 a barrel in the fourth quarter of 2015 compared with US$77 a year earlier.

The average Henry Hub US gas marker price was US$2.27 per million British thermal units compared with US$4.04 in the fourth quarter of 2014.

Chief executive Bob Dudley said: "We're continuing to move rapidly to adapt and rebalance BP for the changing environment. We’re making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment.

"Our plans set out a clear course for BP for the medium term and will allow us to achieve growth in the longer term.

"All of this underpins our commitment to sustaining our dividend and then growing free cash flow and shareholder distributions over the long term."

Annual controllable cash costs in 2015 were US$3.4bn lower than in 2014 and are set to be close to US$7bn lower in 2017.

BP has now completed the US$10bn divestment programme announced in October 2013 and plans a further US$3-US$5bn during 2016.

Organic capital expenditure for 2015 was US$18.7bn. BP expects annual organic capital expenditure to remain between US$17bn-US$19bn in 2016 and 2017 and to be at the lower end of that range in 2016.

Finance chief Brian Gilvary said: “We will keep the capital frame under review as we move through 2016 and beyond."

Underlying operating cash flow for the fourth quarter of 2015 was US$5.9bn, bringing the total for the year to US$20.3bn, compared with US$32.8bn for 2014, down 38%.

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