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The FTSE 100 energy giant’s better than expected full-year results revealed strong operating cash flows, which were driven higher by the recovery in global oil prices and a 12pc growth in BP’s oil and gas business.
The oil major made $6.2bn in replacement cost profits, its standard measure of profitability, for the full year compared to just $2.6bn in 2016 when oil prices were at their lowest ebb. In the final quarter of last year alone BP made $2.1bn, up from just $400m in the last quarter of 2016.
BP boss Bob Dudley said last year was “one of the strongest years in BP’s recent history”, which will accelerate the momentum of the the group’s five-year plan as it enters its second year.
Brian Gilvary, BP’s chief financial officer, added that the group’s cash flows were now “back in balance” as it undertakes the start of its programme to buy back the shares it paid out to shareholders in lieu of dividends during the oil market rout.
BP spent $343m on share buybacks in the final quarter, which Mr Gilvary said more than offset the scrip dividends offered in September.
The group’s rigorous discipline on spending has brought BP’s costs down from $60 a barrel to $53 a barrel, and will remain in place for 2018 to allow further buybacks, Mr Gilvary added.
But the tight reign on spending has nonetheless driven “the most activity we’ve seen in recent years if not in the history of the company”, he said.
BP is working hard to grow its production portfolio after years of austerity. It started up six projects last year and will start up another five new oil and gas projects this year. It has also completed its most successful exploration drive since 2004 to secure future production growth. By 2020 BP estimates it will have created 800,000 barrels of new production from 2020.
Meanwhile, BP will also undertake “measured” investments of around half a billion dollars a year in ‘new energies’ such as renewable power and biofuels.
BP returned to the solar market late last year with a £150m deal to take a stake in Europe’s biggest solar operator and plans for a global roll-out of photovoltaic panels.
Lighthouse BP will sit within its Alternative Energy business alongside investments in wind energy, biofuels and biopower as part of BP’s shift towards lower carbon energy.
Mr Dudley said BP’s focus is to reduce its carbon emissions “footprint”.
“It’s not a race to renewables, it is a race to lower greenhouse gas emissions,” he said.
The group’s three key priorities include reducing carbon emissions from its operations, lowering the carbon-intensity of the fuel products it sells and tapping cleaner new technologies.
Shell’s ‘new energies’ division will invest in five key areas: advanced mobility such as electric vehicle charging, biofuels and other low-carbon fuel products, carbon management technology, power and energy storage, as well as digital technologies.
“We are embracing the energy transition, seeking new opportunities in a changing, lower-carbon world,” Mr Dudley said.