BP back in the black for first time in three years

BP recorded a $118 million profit for its Alaska business in 2017, moving the company’s operations in the black for the first time in three years, BP officials said March 29.

The company also paid the state of Alaska about $543 million in taxes and royalties during the year. Financial performance of BP’s North Slope oil production as well pipelines and tankers, which move the Alaska oil to market, were included in the report.

Higher oil prices and steady production from the North Slope helped improve the financial performance of the company’s Alaska business units, but company officials also credited contractors for helping make production operations more efficient.

BP Alaska president Janet Weiss said she was proud of the progress BP and others in the industry are making in adapting to a “lower for longer” oil price environment, a phrase BP managers have been using to signal an expectation that oil prices will remain near current levels for the next few years.

The turnaround in BP’s Alaska “cash flow” has been dramatic. “We had positive cash flow for the year at about $619 million following two straight years of losses,” Weiss said.

Cash flow refers to operating revenues, or cash, earned by the sale of oil, and if its exceeds direct operating costs the company is operating in the black. Things like depreciation of capital assets, meanwhile, are considered in a company’s final income statement.

David Knapp, BP’s Alaska xxx, said the company lost $174 billion on a cash basis in 2015 and $358 million in 2016. The dramatic improvement to $619 million in 2017, on a cash income basis, was helped by a one-time $500 million tax benefit from federal tax changes enacted last December, which reduced the federal corporate income tax rate from 35 percent to 21 percent.

Even without the tax change BP had moved its Alaska operations into the black. Cost reductions played a key part but oil prices also improved in 2017 to an average $54.49 per barrel, up from an average of $43.27 per barrel in 2016.

BP was also able to keep Prudhoe Bay production steady at over 280,000 barrels per day for the third year in a row.

David Knapp, BP’s Alaska Head of Control, said the company lost $174 billion on a cash basis in 2015 and lost an additional$358 million in 2016. The dramatic improvement toa positive$619 million in 2017, on a cash flow basis, was helped by higher prices, strong production, and the prudent management of operating costs and capital expenditures(prices averaged $54.49 in 2017 compared to $43.27 in 2016 and BP was also able to keep Prudhoe Bay production steady at over 280,000 barrels per day for the third year in a row).