Despite 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its entire U.S. gas station line—over 11,000 stores—as Amoco stores, resurrecting an untarnished brand that was superseded when BP bought Amoco.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?
To read more news on this, and similar stuff, keep up with my updates by following me, Kit Eaton, on Twitter.