Cash is king

4 February 2014 By Fiona Maharg-Bravo

It’s all relative: BP’s profit fell almost a third in the fourth quarter, but it was no worse than expected. Russia and mounting Gulf of Mexico spill costs make its earnings hard to predict. But, unlike Shell, it has set more concrete targets to back up its promises.

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BP posted a 28 percent drop in fourth-quarter underlying replacement cost profit to $2.8 billion, driven by weak refining. For the year, the London-listed oil and gas firm posted a profit of $13.4 billion, against $17.1 billion in 2012.

BP said its earnings were hurt by difficult conditions in its shrinking refining business and costs associated with the startup of its Whiting plant in the U.S. The decline was partially offset by higher earnings from Rosneft, its Russian business. BP also said it would increase provisions for the 2010 Gulf of Mexico oil spill by $189 million.

The company spent $24.6 billion on projects in 2013, more than the $21.1 billion in operating cash it generated. The company reiterated a cashflow target of $30 to $31 billion for this year, while maintaining flat capex. It raised the fourth-quarter dividend by 5.6 percent, against the same period last year.

Shell said on Jan. 30 that it had suspended its Arctic drilling plan as part of a wider drive to cut spending and streamline operations following a major profit warning in January.

BP shares fell 1.8 percent, to 465 pence by 1245 GMT.

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