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Energy

BP reports annual profit for Alaska business at $118 million, with massive tax-cut boost

  • Author: Alex DeMarban
  • Updated: March 29, 2018
  • Published March 29, 2018

Higher oil prices, stable production and a boost from the federal corporate tax cut help BP's overall business in Alaska make a profit in 2017, in a sharp improvement from the previous year, the company reported Thursday.

Counting operations associated with its Alaska production, including shipping crude oil to Lower 48 refineries, BP's Alaska regional businesses earned $118 million in 2017, BP said in a statement emailed by Alaska spokeswoman Dawn Patience.

That's up from the $184 million loss the company reported for those operations in 2016, officials said.

"On the financial front, I am very proud of the progress that BP Alaska, and indeed the entire Alaska industry, has made in adapting to the lower for longer oil price environment," said Janet Weiss, BP Alaska region president, referring to the expectation oil prices will stay low.

The financial data comes after BP Exploration Alaska, a BP subsidiary and operator of the giant Prudhoe Bay oil field, filed an annual report Thursday required by the Securities and Exchange Commission.

The report is a once-yearly chance to review BP's income in Alaska, useful information for a cash-strapped state dependent on oil production for much of its revenue.

BP on Thursday reported paying taxes and royalties to the state of Alaska of about $543 million in 2017.

David Knapp, head of control for BP Exploration Alaska, said the company does not break out the taxes and royalties because of taxpayer confidentiality laws. Royalties are the landowner's share of produced oil.

BP Exploration Alaska — the part of BP's operation that produces oil in Alaska — reported a profit of $830 million in Alaska in 2017, according to its SEC report.

In 2016, it earned $85 million.

BP Exploration Alaska's increased earnings come in part thanks to the tax cut passed last year at the urging of the Trump administration, which reduced corporate tax rates from 35 percent to 21 percent.

The tax reduction provided a $500 million benefit to the subsidiary's bottom line in 2017, BP's statement said.

Also important was the company's ability to stabilize production for three years running at the Prudhoe Bay field, the statement said. BP's share of Alaska production was 109,000 barrels of oil daily, up by 2,000 from the previous two years.

Previously, production had long declined at Prudhoe Bay, still one of the largest producing fields in North America after more than four decades of operation.

BP has said it reduced operating expenses there but kept production flat as crews found relatively inexpensive ways to increase the number of active wells and better target remaining oil.

Oil prices also rose in 2017 to $54 a barrel from $43, increasing BP income.

BP is one of Alaska's largest producers alongside ExxonMobil and ConocoPhillips.

BP's statement to reporters explained how the financial reporting required for BP Exploration Alaska looks at one part of BP's overall activity tied to Alaska production.

BP Exploration Alaska's annual report to federal regulators does not include costs of shipping oil down the 800-mile trans-Alaska pipeline and by tanker to U.S. refineries. It also does not include expenses for the Alaska LNG project to move North Slope gas to Asian markets, the statement said.

BP, ConocoPhillips and ExxonMobil backed away from the $43 billion Alaska LNG project more than a year ago, allowing the state gasline agency to take control. But BP later signed a cooperative agreement with the Alaska Gasline Development Corp. to provide help on project development. The agreement lasts through June 30.

ConocoPhillips is required by federal regulators to report its Alaska income every three months. The company reported earning $652 million in Alaska in 2017, nearly tripling 2016 income as oil prices climbed, according to financial documents.

Federal reporting requirements are based on the importance of one area to a company's bottom line. ExxonMobil does not break out its Alaska profits.

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