Lifted by more efficient delivery from existing fields and a boost from new oil and natural gas projects, BP plc delivered during the final three months of 2018, offsetting a slump in crude prices.

The London-based supermajor’s better-than-expected results offered solace to shareholders concerned about the debt encumbered last year to pay $10.5 billion for BHP’s U.S. onshore properties centered in the Permian Basin. It was BP’s biggest deal in about two decades, transforming it once again into a competitive Lower 48 production enterprise.

Group CEO Bob Dudley, who led a conference call with his management team, said the company is hitting on every metric.

“In the upstream, we remain on track to deliver 900,000 boe/d of new major project production by 2021, supported by the start up of a further six major projects during 2018,” he told investors. “We also completed the transaction to acquire BHP's Lower 48 assets, creating a significant position in the region that is already contributing to production earnings and cash flow growth.

“And with the sanctioning of a further nine projects in 2018, our organic reserves replacement ratio was just over 100% for the year. On an organic plus inorganic basis, it was 209%.”

Even as oil markets reversed course late in the fourth quarter, BP turned more profits, with net income climbing to $3.48 billion ($1.04/share) in the final period, handily beating Wall Street estimates of $2.64 billion. BP had earned $2.107 billion (64 cents/share) in 4Q2017.

Profits in 2018 soared to $12.7 billion ($3.82/share), nearly matching 4Q2014 profits of $12.1 billion in 2014, when oil was trading close to $100/bbl. BP had earned $6.17 billion ($1.88/share) in 2017.

Lifted by the completion of the BHP deal last fall, the Lower 48 division, BPX Energy, reported total hydrocarbons in 4Q2018 of 447,000 boe/d, versus 321,000 boe/d sequentially and 319,000 boe/d in the year-ago period. BPX produces natural gas, natural gas liquids and condensate across six states, including production from unconventional gas, coalbed methane and shale gas.

U.S. onshore gas production in the final three months increased to 2,053 MMcf/d, versus 1,614 MMcf/d sequentially and 1,574 MMcf/d in 4Q2017. Liquids output jumped to to 93,000 b/d from 42,000 b/d in 3Q2018 and 47,000 b/d a year earlier.

BPX also raised its spending for U.S. onshore targets, with capital expenditures (capex) increasing to $358 million from $216 million in 4Q2017.

For its U.S. natural gas, BP fetched an average price of $3.10/Mcf in 4Q2018, versus $2.22 in 3Q2018 and $2.35 a year earlier. Average domestic liquids prices were $36.51/bbl, compared with $38.80 in 3Q2018 and 4Q2017’s $29.64.

The willingness to open the pocketbook to start up six major projects during 2018 helped increase global output overall by 2.4% to 3.683 million boe. BP has brought online a total of 19 projects since 2016.

Because the supermajor is using a $50/bbl crude price for internal planning, it has breathing room when prices are higher to reduce debt, repurchase shares and fund capex, CFO Brian Gilvary said.

Brent crude is expected to average $60-65/bbl amid tightening supply from the Organization of the Petroleum Exporting Countries and turmoil in Venezuela and Libya.

“Because our balance is at $50, we’re in pretty good shape,” Gilvary said. “The price looks pretty constructive around $60, $65.”

Organic capex totaled $4.4 billion in 4Q2018 and $15.1 billion for the year. After adjusting for the working capital build, the organic free cash flow surplus last year was $6.5 billion, “equivalent to an organic cash breakeven of around $50/bbl crude on a full dividend basis,” Gilvary noted.

Organic capex this year should be relatively flat at $15-17 billion, which would allow gearing to fall below 30%. The gearing ratio measures the proportion of borrowed funds to equity. BP late last year said gearing would return to a middle range of 20-30% by the end of 2019. That is now expected to occur in 2020, in part because of the BHP acquisition.

"We’ll bring the gearing back down,” Dudley said. “I’m not concerned about ticking outside the range a little bit.”

There are concerns about the wild volatility in the oil markets.

“We continue to see a number of factors contributing to an increase in volatility in the energy markets,” Dudley said. On supply, ‘U.S. tight oil is expected to continue to grow strongly, especially in the second half of the year as new pipeline infrastructure is introduced. On demand, we expect growth to remain above average, supported by continuing gains in China and India.”

However, the outlook for oil “is expected to remain volatile with many uncertainties, including how markets respond to involving sentiment around ongoing trade discussions, and Venezuela is an obvious concern.”

Dudley also offered his views of the natural gas market, which he expects to be “sensitive” over the coming months on back-and-forth weather conditions. BP for years has been North America’s top natural gas marketer, according to NGI’s quarterly survey.

Henry Hub prices “moved significantly in the fourth quarter, increasing to $3.70/MMBtu with storage levels well below historical averages. Year-to-date, prices have returned to recent average levels of around $3 due to milder weather. Relatively low levels of storage mean that prices are likely to remain sensitive to weather conditions over the next few months.”

BP continued to arm future production with new oil and gas projects, but the company has a dual strategy to reduce carbon emissions, a subject that Dudley hammered during the conference call.

“As investors and the wider society are faced with the challenges of near-term price volatility, so too are we focusing our collective attention on the dual challenge facing the global energy system...The world will need all forms of energy to meet demand in any scenario. Renewables will grow significantly at a faster pace than any other form of energy in history.

“However, oil and gas in particular still have a significant role to play in the dual energy challenge. Successful companies will be those who have the greatest flexibility adapting to the prevailing price environment to produce the energy required in the form demanded.”

As BP’s business grows to meet global energy demand, he promised that “our net carbon emissions will not.”

Record reliability of the upstream facilities hit 96%, while the return on average capital employed climbed to 11.2% from 5.8% in 2017. Refining throughput churned to its highest level ever on the back of North America’s supple and cheap oil supply, while the downstream unit delivered a record quarter.

BP sold $3.5 billion of assets last year, part of a plan to divest more than $10 billion over the next two years. In addition, it paid a dividend of 10.25 cents/share in 4Q2018, which was 2.5% higher than a year earlier.