Fast Company

Oil Spill? What Oil Spill? BP Posts Profitable Fourth Quarter

BP moneyDespite reporting an annual loss for 2010, BP's fourth quarter (as revealed in freshly published reports) actually saw the energy giant return to profit. So much so that it's decided to pay a dividend to its shareholders. How did it pull off this business trick?

BP's annual report for 2010 notes the firm posted a loss of $3.7 billion, largely due to a total charge of $40.9 billion incurred by the Gulf of Mexico oil spill disaster. But in the fourth quarter of 2010, BP actually pulled in a profit of $4.4 billion dollars, which has prompted the company to pay a small dividend of 7 U.S. cents on the share to its shareholders for the fourth quarter. This is pretty amazing for a company that was in the cross-hairs of many a politician, environmentalist, and banker for the better part of last year, thanks to its involvement in the worst oil spill disaster in U.S. history.

The reason BP's managed to pull in a profit in the end of 2010? It's actually a diverse business, and its revenue streams from billions of consumers and businesses relying on its petrochemicals have continued to gush. The high unit price of oil certainly helped, pushing revenues up even though production was down. You may have an economic opinion on the dangers or benefits of artificially high oil prices (or skyrocketing prices, which have caused complaints from industrialists facing fuel tax hikes in BP's home of Britain), but it's certainly eye-opening that a company can take on over $40 billion in spill-related payouts and then return to profitability inside three months.

BP also executed swift damage-control maneuvers, including some (pretty misguided) attempts to keep journalists away from oil-affected areas of coastline, blanking press queries and admitting to plans to just "move on" and get past the disaster. BP also bought lots of sponsored ads via Google that appeared near the search results when people tried to Google information on the oil spill, and there was considerable debate about re-branding its entire U.S. gas station line--over 11,000 stores--as Amoco stores, resurrecting an untarnished brand that was superseded when BP bought Amoco.

The aggregate effect of all this posturing and PR slickness, propped up by a sturdy business that's simply not going to go away despite BP's role in spilling millions of barrels of oil into the sea, is that it all seemed to work: BP actually managed to turn a loss into a profit, by blanking the press, subtly schmoozing the public, and just getting on with "business as usual."

Is this kind of oil-industry resilience the reason that Stanford's amazing prediction of an oil-free world inside 40 years will never work?

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1 Comments

  • medbob

    This is actually evidence of a large bubble in the price of oil. By preventing exploration and extraction of Oil by the Oil Companies, the price of oil is being falsely elevated. Competition between companies is reduced, and profit margins rise.
    If oil production were unhindered, the price would fall as would profits. The margin on oil would fall closer to the production cost. Regulation in this market has the same effect as a decrease in supply, causing the price to rise.
    The lack of competition in this market is serving to create unnatural market forces, and distorts all aspects of the market. This is what happens when regulation is used to achieve goals that are outside the natural order of justice, safety and security. By pursuing the goal of elevating prices to allow alternatives to emerge before the economics dictate, not only will Oil Companies profit unnaturally, but our country is placed at a great disadvantage in relation to other oil producing countries that are not subject to the same regulatory pressures.
    "Managing" markets never works. Housing is proof, as well as Oil and Credit. These bubbles will be our undoing.