BP likely made at least $1B during Texas power crisis
BP likely made more than $1 billion from its energy trading business when natural gas prices skyrocketed during the February winter storm.
The British oil major, which has one of the largest trading
hubs in North America, on Tuesday said the business had an “exceptional” first
quarter in which the company posted a $2.6 billion profit on $6.1 billion of
revenue. Analysts had expected BP to report a first-quarter profit of $1.4
billion.
BP said it doesn’t disclose trading numbers, but Citigroup
analyst Alistair Syme said he estimates the company made a large profit during
the storm.
“Gains from trading in gas and power are not quantified, but
the move in (Earnings Before Interest, Taxes, Depreciation and Amortization)
suggest these easily topped $1 billion,” Syme said in a research note to
clients. “Although not mentioned by name, we think positioning around the
February storm in Texas, Storm Uri, has been the biggest driver of these
gains.”
An accounting of the energy industry’s winners and losers
has emerged in the weeks since the storm and power grid collapse killed nearly
200 Texans and caused billions of dollars in damage.
Vistra, the largest power generator in Texas, on Monday said
it took a $1.6 billion financial hit as a result of the storm and crisis.
Houston pipeline operator Kinder Morgan last week said it earned $1.6 billion
after it was able to keep natural gas flowing through its pipelines, in large
part because it had invested in safeguards to protect equipment from brutally
cold temperatures.
Natural gas prices skyrocketed as the winter storm plunged
Texas into frigid darkness, causing gas production to fall by nearly half
during the storm. Operators of gas-fired power plants said inadequate natural
gas deliveries brought some of their operations to a halt, resulting in a cycle
in which power outages took out more natural gas production that led to more
blackouts.
Vistra said it was forced to spend $1.1 billion on natural
gas in the spot market at a price of $700 per million British thermal units to
keep its natural gas-fired power plants operating during the storm. The company
typically contracts for gas at about $3 per million British thermal units.
BP said it generated surplus revenue of $1.7 billion during
the first quarter, helping it to meet debt reduction targets a year ahead of
schedule.
While the company’s trading business benefited from the high
prices, CEO Bernard Looney said thousands of BP employees in Texas endured days
of without power and water, as well as damage to their homes. The company paid
to house some of its 4,000 Houston-area employees in hotels.
After taking care of its employees, Looney said BP focused
on how it could keep electricity and natural gas flowing in Texas. Employees
worked 24 hours a day, sometimes driving around Houston in search of available
Wi-Fi networks to keep operations running, and helping utility companies secure
power and gas.
“I think it is important that people understand that, first
and foremost, Texas is not just a market for us, it is our home in America and
we have thousands of employees, many of whom went without water or power for
many, many days,” Looney said. “The whole focus was on maintaining as much
supply to our customers as we could, operating within the market and,
obviously, doing everything with the utmost of integrity.”
After its strong earnings during the first quarter, BP said
it plans to buy back $500 million worth of shares from investors during the
second quarter. The company warned investors, however, that during the second
quarter it will pay Gulf Coast states and the U.S. government the annual $1.2
billion pre-tax payment related to the 2010 Deepwater Horizon accident, which
caused the worst oil spill in U.S. history.
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