BP, rival NZ petrol chains lift profits despite falling sales as oil prices recover

New Zealand's biggest petrol chains increased their profits in 2016 despite revenue dropping, as rising oil prices made their inventories more valuable.

The New Zealand division of British Petroleum, one of the world's largest oil and gas companies, lifted annual profit 15 percent in 2016 to $147 million, though revenue dropped 3 percent to $2.7 billion, financial statements lodged with the Companies Office show. Cost of sales fell 7 percent to $2 billion, meaning gross profit rose 10 percent from a year earlier to $704 million.

BP New Zealand is the third of the major petrol chains to post its annual results, and its accounts show net profit rose to $481 million from $301 million across the service station operators while revenue dropped to $8.77 billion from $9.58 billion a year earlier. That's the second year of petrol companies boosting profits amidst falling sales.

ExxonMobil NZ also reported for the year ended Dec. 31, while Z Energy's annual reporting was to March 31, 2017. ExxonMobil, which turned from a loss to a $91 million profit last year, attributed its gains to increased oil prices and higher inventory levels in the year, which bolstered its results by a $107.3 million increase in inventory value. BP New Zealand's accounts show its inventories were worth $366.6 million at the end of 2016, from $269.6 million at the end of 2015.

When Z Energy reported in May, its annual profit had more than tripled to $243 million from $64 million, though that included 10 months of contributions from its acquisition of Chevron New Zealand's brands. At the time, the company's chief executive Mike Bennett said its fuel margin had fallen 17 percent to 17.6 cents per litre from the year earlier, and it expected margins to soften over the 2017 financial year with more competition in the market.

Z Energy's inventories were worth $464 million as of March 31, up from $203 million a year earlier, which it said was due to higher oil prices and increased inventory. It held 5 million barrels of oil, from 2.7 million barrels in 2016, due to both the Chevron acquisition and 2016's inventory being lower than usual.

Global oil prices collapsed in late 2014, driven by a glut, falling below US$50 per barrel of Brent crude from between US$90 and US$100. Weakness continued in 2015 and 2016, with prices as low as US$30 per barrel, but recovered somewhat over the course of 2016, rising above US$50 again. Price volatility persists, with output cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and other oil producers failing to drain oversupply.

BP New Zealand's tax expense was $67.5 million in 2016, up from $36.7 million a year earlier. It paid no dividends in the latest year, having paid $300 million in dividends to its two shareholders, both BP entities, in 2015. As at Dec. 31, 2016, it had $420 million in retained earnings, up from $276 million a year earlier.

The local entity sold down its stake in New Zealand Refining Co in March by just over half, selling 34.7 million shares for $2.32 each. That left it with 31.5 million shares in NZ Refining, just over 10 percent of the total shares, and saw its share of profit of an associate drop to $18 million from $37.5 million a year earlier.

BP's London-listed shares recently traded at 464.21 British pence and have dropped 9.2 percent this year.

(BusinessDesk)