BP BP Plc

Oil company's output and share price are on the mend, as effect of 2010 disaster fades

By Sarah Kent 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 2, 2018).

LONDON -- BP PLC shares rose to levels not seen since shortly after the Deepwater Horizon disaster in 2010, as rebounding oil prices led to solid first-quarter results.

Like other big oil firms that have reported recently, London-based BP benefited from recently lofty oil prices, but it also showed rising production. The outcome was its strongest quarterly earnings since mid-2014 -- which could go some way toward convincing investors that BP's ambitious plan to regain its position among the world's top energy companies is gaining steam.

BP's shares rose 1.8% to GBP5.48, or about $7.50, in London trading on Tuesday.

The stock hit a two-year high of GBP6.58 on April 21, 2010, the day after the Deepwater Horizon explosion, which killed 11 and sent oil spewing into the Gulf of Mexico, resulting in the worst offshore oil spill in U.S. history. Once investors realized the scale of the disaster, BP shares hurtled lower, hitting a low of GBP2.96 in June 2010.

Then-Chief Executive Tony Hayward resigned the following month, and BP started what would turn out to be a multiyear, multibillion-dollar effort to recover. To pay for cleanup costs and legal fees, BP was forced to sell off billions of dollars in assets, dramatically shrinking the size of the company. To date, the spill has cost BP more than $65 billion.

The company agreed to a landmark $20 billion deal to settle all federal and state claims for the accident in 2015. Since then, executives, including current chief Bob Dudley, have tried to turn the page on the disaster. Part of that effort has been a plan to return its oil-and-gas production to four million barrels a day, while boosting profits and cash flow.

The company said Tuesday its replacement cost profit -- a number analogous to the net income that U.S. oil companies report -- was $2.4 billion in the first quarter, compared with $1.4 billion in the same period a year earlier. The last time it reported profit of that size was in the third quarter of 2014, when oil prices were hovering near $100 a barrel.

In addition to its Deepwater Horizon woes, BP suffered with the rest of the industry through years of low oil prices. Oil prices fell to about $25 a barrel in 2016, before rebounding. International crude is now trading near $75 a barrel.

The company's first-quarter production rose 6% from a year earlier. BP started a record number of projects around the world last year and intends to initiate six more in 2018, part of a plan to add 900,000 barrels a day of new production by 2021. That would return output to near its pre-Deepwater Horizon levels of roughly four million barrels a day. On Tuesday, it said it pumped 3.7 million barrels a day in the first quarter.

BP finance chief Brian Gilvary raised the prospect that the company would consider raising its dividend in the second half of the year as it expects debt levels to subside. It kept its payout unchanged for the first quarter.

But BP still hasn't escaped the financial liabilities of the Deepwater Horizon disaster. The company said it paid out $1.6 billion in the first quarter, including the final installment from a settlement with the U.S. Justice Department to resolve all criminal claims. For the full year, payments are expected to total just over $3 billion. The company faces charges of about $2 billion next year, and then more than $1 billion a year out past 2030.

BP caps a mixed earnings season for the world's biggest oil companies. Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell PLC posted their best first-quarter profits in years, but investors remained skeptical of companies that failed to meet expectations when oil prices were at their highest level since 2014.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

May 02, 2018 02:47 ET (06:47 GMT)

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