BP, rival NZ petrol chains lift profits

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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 per cent in 2016 to $147 million, though revenue dropped 3 per cent to $2.7 billion, financial statements lodged with the Companies Office show. Cost of sales fell 7 per cent to $2b, meaning gross profit rose 10 per cent from a year earlier to $704m.

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

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

When Z Energy reported in May, its annual profit had more than tripled to $243m from $64m, 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 per cent 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 $464m as of March 31, up from $203m 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 (NZ$70) 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 $67.5m in 2016, up from $36.7m a year earlier. It paid no dividends in the latest year, having paid $300m in dividends to its two shareholders, both BP entities, in 2015. As at December 31, 2016, it had $420m in retained earnings, up from $276m 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 per cent of the total shares, and saw its share of profit of an associate drop to $18m from $37.5m a year earlier.

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

- BusinessDesk