This morning’s numbers from BP paint a picture of a company operating above expectations across all of its businesses, sending the share price modestly higher.

The decline in oil prices in Q4, from four year peaks of $85 a barrel saw profits decline slightly from the lofty levels of Q3, which saw refining levels hit 15 year highs, however they were still well above the levels of a year ago.

As a result of the falls in the price of oil BP’s share price did slip back from the multiyear highs of just above 600p back in September over concerns that its profits might miss expectations.

Judging by this morning’s numbers investors shouldn’t have been too concerned as overall profits for the year jumped to $12.7bn, well above last years $6.16bn , and above consensus forecasts of $11.9bn.

There was some concern that the acquisition of BHP Billiton’s shale assets for $10bn might well come back and bite it, particularly since the transaction was expected to have been funded by the proceeds of cash generation.

It was stated at the time that this was predicated on the oil price remaining at around the $80 a barrel level. This turned out to be somewhat wishful thinking and the resultant drop in the oil price appears to have manifested itself in BP’s net debt levels rising $6.5bn to a record $44.1bn, giving it a net gearing of 30.1% just above managements 20-30% range.

For now investors don’t appear too concerned about this, while BP management seem confident that oil prices will stay in a $50 to $65 range, with a break even rate of $50 a barrel, which should translate into net debt levels moving back down again, over the course of 2019.

This profits outperformance over the last 12 months hasn’t stopped the share price underperforming relative to the oil price.

The boost to profits this year has come about as a result of the early delivery of expansion projects in the Gulf of Mexico and Australia, which has boosted overall output.

Total divestments for the year came in at $3.5bn, while capital expenditure for the was slightly down from 2017 levels while the company announced a quarterly dividend of 10.25c a share. The company continued its buyback programme by repurchasing 2m shares at a cost of $16m.

In terms of growing the business the company started six new major upstream projects in 2018, while also expanding into renewables by investing $200m in Europe’s largest solar power provider, Lightsource, which is developing solar projects in Asia, the US and Europe. This project appears to be going in the right direction with new contracts being signed across the US this year, in California and New Mexico, as well as Brazil.

The company BP Lightsource has also announced its intention to use thousands of solar panels near Sedgefield County Durham to power 13k homes in the North East of England.

BP also acquired UK electric charging company Chargemaster.

Overall a decent set of numbers for BP, however its high debt levels and wafer thin dividend cover still make it vulnerable to an economic slowdown or a drop in demand. In its favour, breakeven costs are lower than a year ago, but a sustained move below $50 a barrel, would raise further concerns, about the company’s ability to increase returns to shareholders.

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