BP unveils first oil from new North Sea field as profits please

BP remains a key player in the North Sea. Picture: Andy Buchanan
BP remains a key player in the North Sea. Picture: Andy Buchanan
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Oil major BP has announced first oil from a key North Sea field after beating forecasts with its latest results.

The group announced “encouraging” early production from the Alligin field, west of Shetland. It came as departing boss Bob Dudley beat expectations in the final set of results he presented as chief executive, allowing him to give shareholders an increased dividend.

Departing chief executive Bob Dudley. Picture: BP plc

Departing chief executive Bob Dudley. Picture: BP plc

The Alligin field, which forms part of the Greater Schiehallion Area, is estimated to have some 20 million barrels of oil equivalent and was originally forecast to produce 12,000 barrels of oil a day at peak.

BP, as operator and on behalf of co-venturer Shell, said the project’s performance had been better than expected, reaching 15,000 barrels a day at peak since start-up in late December.

The development has included new subsea infrastructure, consisting of gas lift and water injection pipeline systems, and a new controls umbilical.
BP North Sea regional president Ariel Flores said: “Achieving first oil from the Alligin field safely, under budget and ahead of schedule is testament to the performance of the project team and their agile approach to planning and execution.

“Alligin is part of BP’s advantaged oil strategy, a development with a shorter project cycle time with oil that is economic to produce and low risk to bring to market.”

Alligin is part of a series of tieback developments in the North Sea, accessing new production from fields located near to established facilities.

Meanwhile, BP reported underlying replacement cost (RC) profit, its most watched measure, of $2.6 billion (£2bn) for the fourth quarter.

Although that was down from $3.5bn in the same period last year, it still beat the $2.1bn that brokers had forecast.

On a full-year basis, underlying RC profit was nearly $10bn, a reduction from $12.7bn a year earlier. On a reported basis, the fourth quarter RC profit fell by 65 per cent to $3.5bn.

As a result, Dudley was able to increase the dividend by 2.4 per cent to 10.5 cents (8.1p) per share, which will be paid at the end of March. The finalised figure in sterling will be published in mid-March.

“BP is performing well, with safe and reliable operations, continued strategic progress and strong cash delivery,” Dudley said.

“This all supports our commitment to growing distributions to shareholders over the long term and the dividend rise we announced today.”

Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, noted: “BP’s results have come in slightly better than expected, but they are still a reflection of the challenging environment for oil and gas companies.

“There are some positives to be taken including the progress of BP’s divestment programme, an increase in production, good reliability, and greater diversification.”

READ MORE: Reaction: Oil giant Shell suffers profit slump but still banks £12 billion

Production at EnQuest was sharply higher in 2019 but the North Sea producer is forecasting lower output this year.

In an operational update, the firm said it had produced just over 68,600 barrels of oil equivalent per day in 2019, towards the top end of its 63,000 to 70,000 barrels guidance.

It pointed to a continued strong performance at Magnus, with production efficiency of more than 80 per cent. Kraken production, meanwhile, was above the upper end of guidance.

Production on the Thistle and Heather platforms was impacted by shutdowns during the final quarter, the firm added.

Production for 2020 is expected to be in the range of 61,000-68,000 barrels per day, as the Thistle and Heather facilities remain closed. Gross production at the flagship Kraken field is expected to be between 30,000 and 35,000 barrels.

Chief executive Amjad Bseisu said: “The group has again delivered on its operational targets, growing production by 24 per cent. Kraken performance in particular has been excellent, with production efficiency above 90 per cent for much of the second half of the year.

“I am delighted with the progress we have made at Kraken and in strengthening our balance sheet.”

RBC Capital Markets analyst Al Stanton noted: “EnQuest this morning published an operating update with numbers slightly ahead of our expectations. We expect the stock to be marked higher on today’s news; but given investors' attention focusing on CO2 emissions; we believe long-term sustained interest requires EnQuest to take a more vocal stance on emissions reduction.”