BP full-year profit beats expectations on strong oil and gas output

  • The British oil giant said its underlying replacement cost profit, used as a proxy for net profit, came in at $12.7 billion in 2018.
  • A company-provided consensus forecast had expected full-year underlying replacement cost profit of $11.88 billion.
  • "This is a really good quarter and, actually, the end of a great year for us," Bob Dudley, chief executive of BP, told CNBC's "Squawk Box Europe" on Tuesday.

BP reported stronger-than-anticipated full-year profits on Tuesday, citing a strong operating performance across all business segments.

The British oil giant said its underlying replacement cost profit, used as a proxy for net profit, came in at $12.7 billion in 2018. A company-provided consensus forecast had expected full-year underlying replacement cost profit of $11.88 billion.

"This is a really good quarter and, actually, the end of a great year for us," Bob Dudley, chief executive of BP, told CNBC's "Squawk Box Europe" on Tuesday.

"We've doubled our earnings from last year (and) we've doubled our returns from last year — that's what shareholders wanted to see," he added.

Shares of BP rose toward the top of the European benchmark Tuesday morning, up more than 3 percent.

BP's fourth-quarter profit jumped more than 65 percent when compared to the same period in 2017, following a sharp rise in oil and gas production and the acquisition of BHP's U.S. shale assets.

Here are the key takeaways:

  • Underlying replacement cost profit came in at $3.5 billion in the final three months of 2018. That compares to $2.1 billion over the same period in 2017.
  • Return on average capital employed was 11.2 percent, compared to 5.8 percent in 2017.
  • Dividend of 10.25 cents per share announced for the fourth quarter — 2.5 percent higher than a year earlier.

Market participants saw large gains in energy shares over the first nine months of 2018 largely wiped out by a dramatic decline in crude futures in the fourth quarter.

A BP company logo at a gas station in London, U.K.
Chris Ratcliffe | Bloomberg | Getty Images
A BP company logo at a gas station in London, U.K.

The value of a barrel of Brent crude soared to a four-year high of $86 a barrel in early October, before collapsing to around $50 within weeks.

"It is part of a journey, returns will always move a bit with the oil price. So, if the oil price continues to go up then that number should go up as well," Dudley said.

When asked how he was expecting oil prices to perform this year, Dudley replied: "As we look it, it feels like the markets will be firmer. I couldn't predict the oil price but we are planning BP between $50 and $65."

Crude futures have hovered around $60 a barrel so far this year.

Late last month, Royal Dutch Shell also reported better-than-expected full-year earnings. The Anglo-Dutch company said its results were underpinned by higher oil and gas prices, year-on-year, as well as a stronger contribution from liquefied natural gas (LNG) trading.