BP narrowly exceeded earnings expectations in the fourth quarter of 2011, with a 14% rise in adjusted net profits to £4.8billion, compared with £3.5billion for the corresponding three months in 2010.
This was in contrast to Royal Dutch Shell, which reported its numbers last week and ensured BP’s quarterly adjusted earnings exceeded those of its rival for the first time in a year.
A high oil price underpinned the BP profits, while production figures were somewhat pedestrian. While overall output declined 5% from a year ago, volume did improve on a quarterly basis.
Operational cash flow of £14billion was also significantly stronger, up 63% compared with the same period in 2010. Chief executive Bob Dudley remains bullish, as reflected in a 14% increase the company’s fourth-quarter dividend; the first rise since the Macondo spill in 2010. While the improved dividend is likely to prove broadly supportive to the share price, the ongoing issues around Macondo continue to cloud the immediate outlook.
Perhaps tellingly, there were eight pages discussing legal proceedings in the fourth-quarter statement, with very little in the way of near-term predictions, except for an increase in organic capital investment and a hint that future production will be at the lower end of market expectations due to a slow ramp up in the Gulf of Mexico.
With the US civil lawsuit set to start on February 27, BP will once again be in the spotlight and expectations are beginning rise on the group agreeing to an early settlement.
That said, the trial has the potential to last up to three years if it goes ahead and as such, plenty of opportunities remain for swings in sentiment, which as we know can translate into a volatile share price.
David Barclay is the divisional director for Brewin Dolphin in Aberdeen