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Petroleum

British Petroleum Records Record Annual Profit Amid Low Oil Price

Strategic Insights

— 1 min read

Despite the challenges posed by the low oil price, British Petroleum (BP) recorded a record annual profit in 1997, marking the third consecutive year the company has achieved a new high. The company's profit after exceptional items surged by more than $600 million to nearly $2.8 billion, driven in part by "self-help" measures worth about $330 million. The oil price fell by around $1 a barrel to an average of $19.10, but BP's "replacement cost" income was 13% higher than in 1996.

Key Takeaways:

  • BP's record annual profit in 1997 was driven by a 4% drop in the fourth quarter, which put income at the low end of expectations, and a 13% rise in the full-year dividend to 22p.
  • The company's "replacement cost" income was 13% higher than in 1996, and its 17% return on capital was the highest of any multinational oil company.
  • BP implemented "self-help" measures worth about $330 million to offset the effects of the low oil price, weaker refining margin, and a stronger pound.
  • The company is investing in China and Malaysia and is expecting output to grow by 5% annually, helped by new production from the ETAP and Schiehallion projects in UK waters.
  • BP reduced its net debt by about $200 million and is expecting its worldwide capital spending in 1998 to match last year's total of $3.5 billion.
  • The company's group chief executive, John Browne, expressed cautious optimism about 1998 and plans were set against an expectation that oil would trade in the lower part of the $15 to $20 per barrel range.

Statistics:

  • BP's profit after exceptional items surged by more than $600 million to nearly $2.8 billion in 1997.
  • The company's "replacement cost" income was 13% higher than in 1996.
  • BP's 17% return on capital was the highest of any multinational oil company.
  • The oil price fell by around $1 a barrel to an average of $19.10 in 1997.
  • BP reduced its net debt by about $200 million in 1997.
  • The company is expecting its worldwide capital spending in 1998 to match last year's total of $3.5 billion.
  • BP's output is expected to grow by 5% annually, helped by new production from the ETAP and Schiehallion projects in UK waters.

Sources:

  • BP's annual report and accounts for 1997.
  • The Times, February 1998.
  • Reuters, February 1998.

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