There’s an art to dressing up bad news, and BP is giving an exhibition. Faced with having to report a truly dismal set of results for 2015, boss Bob Dudley tried valiantly to focus on the positives.
‘We are continuing to move rapidly to adapt and rebalance BP for the changing environment. We’re making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment into the future of our portfolio,’ he said.
Well that’s alright then. You can’t really blame Dudley for trying to put a brave face on things, but beneath all that management speak seasoning, there is the bitter taste of $44 (£31) oil. That was the average price in 2015, 43% less than 2014 and well under half what it was in 2013.
The result? BP made a loss of $6.4bn in 2015, following a $3.8bn profit last year.
Ah, but there’s profit and there’s profit. The oil industry prefers to use replacement cost profit rather than regular profit (i.e. the amount that actually hits the balance sheet) as an indicator of performance. This allows it to calculate the costs of oil using current prices rather than historical prices, in an effort to factor out oil price volatility.
By this measure, BP’s loss was only $5.1bn, and on an underlying replacement cost basis – you know, ignoring the billions of dollars in charges from things like impairments as well as the actual price of oil – it actually made a profit of $5.9bn, down only 51% from 2014.
One wonders how much currency that has with shareholders. The $6.7bn in dividends they received last year might have helped, though. BP has continued – and is continuing – to pay out dividends at 10c a share, despite an assault on its balance sheet that has seen net debt rise 20% to $27.2bn.
That may keep shareholders happy for now, but combined with aggressive and ongoing cost cutting it’s leaving the company distinctly less attractive for the future - especially with oil now at $33. The one saving grace seems to be the Deepwater scandal, which finally appears to be on its last legs (six years and $55bn later). You’ve got to look on the bright side, eh. Otherwise you'd just end up filling a barrel full of tears.