BP profits double, soaring on higher oil and gas production

After raising its dividend, the oil giant is looking ahead to 2019 with a positive outlook.

Article updated: 5 February 2019 2:00pm Author: Helal Miah

  • Underlying profits reached $12.7bn, due to better oil prices, improved production and cost cutting measures taking effect.
  • For investors, BP is an attractive proposition with a healthier outlook and good dividends.
  • We continue to recommend the shares as ‘buy’ for investors seeking a balanced return.

Similar to what we’ve seen with some of BP’s peers, the oil giant reported an excellent set of full year results, leaving investors pleased as the shares jumped nearly 4% in early morning trading. The dividend has been raised by 2.5% with share buybacks ongoing.

Underlying replacement cost profits reached $12.7bn, more than double that of the previous year, primarily down to better average oil prices during the year, but also previous cost cutting measures coming through. Production also was very good, upstream production excluding Rosneft was up by 3% on the year, the highest since 2010 due to major project ramp-ups and much improved plant reliability.

Going forward, management expect 2019 production to head higher given the new projects coming online. In addition after years of divestment to fund compensation payments for the Gulf of Mexico accident, the group’s reserve replacement has grown significantly due to the shale assets acquired from BHP Group. However, the acquisitions have left them with much higher net debts of $44.1bn and a gearing ratio of 30.3%, higher than their previous targets.

Overall, this is an excellent set of results and we would expect the group to make further progress should oil prices hold. For investors BP is an attractive proposition with a healthier outlook and good dividends. We maintain our ‘Buy’ recommendation for investors seeking a balanced return willing to accept a medium level of risk.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.