BP last Tuesday announced its financial results for the fourth quarter and full year of 2012. The company's fourth quarter profit fell nearly 80 percent, mostly due to payouts related to the Gulf of Mexico oil spill. BP said that net profit fell to $1.62 billion in the quarter ending on December 31, 2012, down from $7.69 billion in the same period in 2011. BP took a loss of $3.85 billion for its settlement of all federal criminal charges with the U.S. government. Underlying replacement cost profit for the period, which strips out the changes in the value of inventories, was down 20 percent on the same period last year at $3.98 billion.

Adjusted for non-operating items and fair value accounting effects, underlying replacement cost profit, was $4.0 billion for the fourth quarter, compared to $5.0 billion for the same period in 2011. For the full year, underlying replacement cost profit was $17.6 billion compared to $21.7 billion in 2011.

Bob Dudley, BP Group Chief Executive, said: “We have moved past many milestones in 2012, repositioning BP through divestments and bringing on new projects. This lays a solid foundation for growth into the long term. Moving through 2013 we will deliver further operational milestones and remain on track for delivery of our ten-point strategic plan, including our target for operating cash flow growth, by 2014.”

Operating cash flow in the fourth quarter of 2012 was $6.3 billion, and $20.4 billion for the full year compared to $22.2 billion in 2011. At the end of 2012, BP’s net debt was $27.5 billion — down from $31.5 billion at the end of the third quarter — representing a gearing level of 18.7%, within BP’s 10-20% target gearing range.

In BP’s upstream, underlying production of oil and gas, excluding TNK-BP, in 2012 was broadly flat with 2011. Fourth quarter production, excluding TNK-BP, was 2.29 million barrels of oil equivalent a day (mmboed), 7% lower than in 4Q 2011, with the impact of divestments, production sharing agreement effects and natural field declines partially offset by new production from major projects.

BP’s downstream delivered a record level of earnings for the year, and a fourth consecutive year of underlying profit growth. In the fourth quarter, despite the continued benefit of strong operations, the segment faced significantly lower refining margins than in the previous quarter. The planned outage at the Whiting refinery as part of the refinery’s upgrade project also had an impact on the quarter’s result.

The sale of BP’s interest in TNK-BP to Rosneft and related transactions expected to result in BP building a 19.75% stake in Rosneft were agreed in the quarter and are expected to complete, subject to regulatory approval, in the first half of 2013. Because BP’s stake in TNK-BP became an asset held for sale following the initial agreement on October 22, the fourth quarter included only 21 days of underlying net income from TNK-BP.

During the quarter BP agreed the sale of non-core upstream assets in the North Sea and China, and of the Texas City refinery and related assets. Excluding the sale of its interest in TNK-BP, BP has now agreed divestments with a total value of $37.8 billion since 2010, effectively completing its major programme of portfolio simplification a year earlier than planned.

“We will continue to see the impact of this reshaping work in our reported results in 2013,” said Dudley. “By 2014, I expect the underlying financial momentum to be strongly evident.”

“We aim to be a focused oil and gas company, creating value by growing long-term sustainable free cash flow,” said Dudley. “We will deliver this through safe and reliable operations, and through disciplined and paced capital investment into a portfolio rich in high-margin opportunities.”

BP continued to work through the legal proceedings in the US during 2012, completing payments into the Trust Fund, and agreeing settlements with the Plaintiffs’ Steering Committee, criminal settlement with the US Department of Justice (DOJ) and settlement of civil claims against BP with the Securities and Exchange Commission (SEC). Primarily reflecting the criminal settlement agreement with the DOJ, BP took an additional $4.1 billion charge in the fourth quarter. The total cumulative net charge for the Gulf of Mexico incident at the end of the year was $42.2 billion.

Concluding, Bob Dudley said: “We are doing the work that needs to be done to be a safer, stronger company. We are steadily building the strong platform for growth in BP for the coming decade.”