BP fourth quarter profit falls short of target

Fourth-quarter profit from BP fell short of target and the oil colossus said cash flow will not increase in 2017 as it hikes its level of disposals and capital expenditure to return the business to growth in the medium term.

A fourth-quarter underlying replacement cost profit of $400m missed the $560m company guidance and resulted in a full year profit of $2.6bn, a 56% drop from the previous year.

BP made a £1bn loss at the reported level for 2016, which was a big improvement on the $5.16bn in 2015.

The quarterly dividend was unchanged at 10 cents per share.

For the coming year, the FTSE 100 group said it expected to balance its books by the end of the year at an average oil price of around $60 per barrel, with capital expenditure now guided to the higher end of its previous guidance at $16-17bn.

Divestments for 2017 were guided to rise to $4.5-5.5bn from the $3.2bn last year before falling back $2-3bn after that.

Beyond 2017, management expect organic free cash flow to grow into the medium term, supported by the ramp-up of production from new upstream projects, strong marketing growth and recent portfolio additions.

"2016 was the year we made significant strides in creating a stronger platform for growth," said chief executive Bob Dudley, pointing to the launch of six major project start-ups and final investment decisions on a further five major projects.

"We have delivered solid results in tough conditions - and are well prepared for any volatility in oil pricing. We have adapted by cutting our controllable cash costs by $7bn from 2014 - a full year earlier than planned.

"Continued tight discipline on costs remains essential. Everything we have done during the year has made us a more resilient and competitive company."

After paying $7.1bn related to the Gulf of Mexico oil spill during the year, Dudley said these liabilities were now "substantially behind us" enabling BP to be "fully focused on the future".