Home' Trinidad and Tobago Guardian : May 4th 2017 Contents BG8 | ENERGY
BUSINESS GUARDIAN guardian.co.tt MAY 4 • 2017
BP's profit triples on
higher prices, output
BP's profit nearly
tripled in the first
quarter of 2017
from a year earlier,
buoyed by rising
oil prices and pro-
duction that hit a five-year high,
while debt piled up in order to pay
for acquisitions and costs for the
2010 Gulf of Mexico spill.
The British oil and gas compa-
ny joined oil major rivals including
Exxon Mobil, Chevron and Total
in posting stronger-than-expected
quarterly earnings, mostly thanks
to higher oil and gas prices.
Oil prices rose by 50 per cent in
the past year to around US$54 a
barrel in the first quarter.
BP expects prices to average be-
tween $50 and $55 a barrel in 2017,
heading to the higher end of the
range if OPEC and major produc-
ing countries extend production
cuts into the second half of the
year, chief financial officer Brian
Gilvary told Reuters.
The results could assuage some
concerns among investors, who
were jolted when BP in February
raised the oil price at which it
could balance its books this year
to US$60 a barrel after a string of
investments that pushed up bor-
Three years since the oil prices
slumped from above US$100 a
barrel and after BP slashed costs
with lay-offs and project delays,
investors want to see cash genera-
tion to cover spending and dividend
payouts, while reducing ballooning
"The results are positive," Cen-
kos Securities analysts wrote, but
adding that "gearing is creeping
up towards the max of the 20-30
per cent target range, although
divestments, including the recent
US$1.7 billion SECCO sale in Chi-
na, should help."
Net debt rose nine per cent in the
quarter to US$38.6 billion, lifting
BP's gearing of net debt to share-
holders' equity from 26 per cent
to 28 per cent, closer to its ceiling
of 30 per cent.
"The debt was always going to
rise in the first half of the year and
the 28 per cent gearing, frankly,
that doesn't cause any problems
at all," Gilvary said.
To keep oil prices buoyant, oil
companies want the Organisation
of the Petroleum Exporting Coun-
tries, Russia and other producers to
extend their global pact to reduce
production for another six months
from June 30.
"If they don't get rolled into the
second half of the year we will con-
tinue to see more (price) volatility,"
in GOM make sense'
This year's Offshore Technology
Conference kicked off with a break-
fast keynote from Richard Morrison,
BP plc's regional president for the Gulf
He outlined how BP was able to adapt
in order to continue to operate efficient-
ly in deepwater Gulf of Mexico.
Despite the low oil price environ-
ment during the oil and gas industry
downturn, operational safety didn't
suffer, said Morrison, adding that there
hadn't been an increase in accidents in
the Gulf of Mexico or elsewhere within
"The economics for deepwater in-
vestments make as much sense today
as they did in 2001," Morrison said.
BP implemented measures to manage
costs, which included cutting its Gulf
of Mexico workforce by half since 2014.
Its production in the Gulf of Mexico in-
creased 15 percent, while production
costs have decreased by 35 per cent for
the last three years.
"BP has rebalanced the cost and reve-
nue equation, so that our Gulf of Mexico
free cash, breakeven point is less than
US$40 per barrel," said Morrison.
And while Morrison believes regu-
lations are good and necessary, he said
regulations should have flexibility.
"The regulatory environment is prime
for modernization and I want the in-
dustry and regulators to work together
to modernise offshore regulations," he
When it comes to the Trump admin-
istration's new tax reform proposals,
Morrison is optimistic.
"It's got to be good. If it spurs growth,
helps suppliers and helps the supply
chain, it can only be better," he said.
"Still, I'll believe it when I see it."
London-based BP is set to start up
seven projects this year, including in
Oman and Azerbaijan, the largest num-
ber in a single year in BP's history. It
hopes to add 800,000 barrels per day
(bpd) of new production by the end of
The renewal of BP's ADCO onshore
oil concession in Abu Dhabi in Decem-
ber was a main contributor to BP's first
quarter rise in output. Total upstream
production, excluding BP's share of
Rosneft output, reached a five-year
high of 2.39 million bpd.
Projects under construction are
ahead of schedule and on average 15
per cent below budget, BP said.
BP's operating cash flow in the quar-
ter rose to US$2.1 billion from US$1.9
billion a year earlier, hit by payments
made toward settling fines related to
the 2010 deadly Deepwater Horizon
rig explosion and oil spill in the Gulf
BP took a pre-tax US$161 million
charge in the first quarter related to the
spill. Total payments are expected to
reach US$4.5 billion to US$5.5 billion
BP reported first-quarter underlying
replacement cost profit, the company's
definition of net income, of US$1.51
billion, exceeding analysts' average
forecast of US$1.26 billion.
OTC: Mexico implements energy
reforms despite low prices
Mexico has implemented govern-
ment regulations to advance its ener-
gy reforms regardless of the oil-price
slump, Aldo Flores Quiroga, Mexico's
deputy secretary of energy for hydro-
carbons, said during a May 1 speech at
the Offshore Technology Conference
"This year, basically, we will be done
with opening everything," Flores Quiro-
ga said. "We're doing this because it
makes sense regardless of the price of
Mexico's energy reforms opened
oil and gas investments to companies
from outside Mexico. This includes up-
stream, midstream, and downstream,
he said, adding that Mexico has signed
contracts with 48 upstream companies.
"Mexico is poised to take full advan-
tage of its untapped deepwater poten-
tial," said Flores Quiroga. While US fed-
eral waters host 2,366 platforms, only
46 wells have been drilled in Mexico's
waters, he noted.
The Mexican government devised a
5-year plan to eventually offer 509 ex-
ploration and production blocks and 82
production fields for both offshore and
onshore. Plans include 119 deepwater
blocks open for nomination.
"We expect to present another deep-
water round (Round 2.4) by December,"
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