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Vol. 22, No. 16 Week of April 16, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

BP reports 2016 Alaska profit $464 million in taxes, royalties

The BP Group, in its 2016 annual report and Securities and Exchange Commission filing, has reported a profit of $85 million from its Alaska operations last year. That compares with a loss of $172 million in the state in 2015. Operating costs in the state in 2016 were $1.2 billion.

The report says that BP paid $102 million in production taxes but the report does not break out the data for state royalties or provide information about the company’s capital investments in Alaska. A company spokesperson has told Petroleum News that in 2016 in Alaska BP paid a total of $464 million in production taxes and other state taxes, and in royalties. The company made capital investments amounting to $600 million in Alaska in 2016, the spokesperson said.

Accrual accounting

The profit that BP reported for its Alaska operations in 2016 is an accounting figure based on accrued income and costs, and not on cash flow. As reported previously in Petroleum News, Janet Weiss, BP’s Alaska president, has commented that BP was running a daily cash flow deficit of $1.5 million in 2016. Weiss said that she expects a positive cash flow in Alaska in 2017. That cash flow represents money flowing in and out of BP’s Alaska operations, including capital funding, which is not included in the SEC accounts.

And the Alaska specific accounting figures in BP’s annual report only apply to BP Exploration (Alaska) Inc., the company that operates BP’s interests in North Slope oil fields. Unlike the cash flow data, the SEC figures do not include data for BP’s affiliate that operates the company’s oil transmission pipelines, in particular the company’s interests in the trans-Alaska pipeline. Nor does the Alaska-specific SEC data include financials for BP’s marine transportation subsidiary that ships the company’s North Slope oil from Valdez, nor the BP subsidiary that has been involved with other North Slope oil producers and the state in the Alaska liquefied natural gas project.

BP’s annual report indicates that the refining marker margin for gasoline and diesel production in the U.S. northwest relative to the market price of North Slope crude oil dropped in 2016 relative to 2015, returning to around the margin calculated for 2014. The report characterizes overall refining margins in BP’s businesses as being relatively weak. However, the refining margin for the U.S. northwest was higher than corresponding margins elsewhere in the world, the report indicates. The refining marker margin indicates the general difference in price between refinery feedstock and refinery products.

Alaska operations

The report says that BP’s focus in Alaska continues to be on ensuring safe and reliable operations while renewing Alaska’s North Slope infrastructure and minimizing oil production decline. The company is using drilling programs, and rig and non-rig well workovers to manage production decline, the report says. Infrastructure renewal in 2016 included compressor replacements; fire and gas system upgrades; safety system upgrades; pipeline renewal; and facility siting projects. BP’s net Alaska oil production averaged at 107,900 barrels of oil per day, the report says.

The report also comments that in January 2017 BP signed a cooperation agreement with the state of Alaska, committing BP to help the state’s efforts in pursuing a project to export natural gas from the North Slope as liquefied natural gas. In late 2016 BP and other major oil companies operating on the North Slope agreed to transition the LNG project to the state, having determined that the project that the companies had been pursuing with the state was not competitive in the LNG market - the state will progress the permitting of the project and “identify commercial structure alternatives that deliver a competitive cost of (LNG) supply,” the report says.


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