BP reports loss on write-down
BP, EUROPE’s second-biggest oil producer, has reported a loss in the second quarter as the company wrote down the value of US assets and output dropped.
BP posted a net loss of $1.4bn compared with a profit of $5.7bn a year earlier, the firm said yesterday. After one-time items and changes in inventories, profit missed analyst estimates. Production, excluding output from the Russian TNK-BP venture, fell 7.4% to 2.3-million barrels of oil equivalent a day.
The results, which included impairment charges totalling $4.8bn, are a setback for CEO Bob Dudley’s effort to rebuild the company after the 2010 Gulf of Mexico spill by focusing on higher-margin fields and selling off less-profitable assets.
Output will remain limited by maintenance work in the third quarter, BP said.
“These results are a significant miss and likely to disappoint the market” even after the write-downs are stripped out, Peter Hutton, an analyst at RBC Capital Markets, said in a note to clients.
“This leads us to be concerned about BP’s strategic progress.”
BP declined as much as 4%, the most since November, and traded down 2.6% at $433 in London yesterday morning.
BP took $4.8bn in impairment charges as it wrote down the value of US shale gas assets and refineries and it decided to suspend the Liberty project in Alaska. It maintained the dividend at 8c a share. Adjusted first- quarter earnings fell to $3.7bn from $5.7bn a year earlier. The average estimate of 16 analysts surveyed by Bloomberg was for a profit of $4.6bn on that basis.
Oil production adjusted for disposals slipped 2.7% in the second quarter, BP said. It stuck to the prediction that production adjusted for divestments and excluding TNK-BP will be “broadly flat” for the year.
“The effects of price movements have impacted our earnings in the quarter,” Mr Dudley said yesterday. “Our extensive turnaround and maintenance programme, which will continue into the third quarter, is also affecting some aspects of our near-term results.”
Royal Dutch Shell, Europe’s biggest oil company, reported a larger decline than expected in profit last week. Exxon Mobil, the world’s largest producer, also missed analysts’ estimates. Brent crude slid 7% in the second quarter from a year earlier to average $108.76 a barrel on slowing global economic growth.
BP shares have dropped more than 6% this year, even after a settlement in March with victims of the April 2010 Macondo oil spill for about $7.8bn.
The company still faces a trial over fines and liabilities with the US department of justice. On July 12, the company agreed to pay a $13m fine for failing to correct safety shortfalls at the Texas City refinery.
BP increased its provision for spill costs by $847m, bringing the total set aside to $38bn. Profit was reduced by $700m from the first quarter by a lag in Russian export duties on oil produced by TNK-BP, BP said.
“There are misses across the board,” said Jason Gammel, an analyst at Macquarie Capital Europe in London. “Mr Dudley won’t be judged on just one quarter, but the underlying profit per barrel just isn’t driving the bottom line it should be at this level of production.”
BP is seeking to sell its stake in TNK-BP after years of disputes with partner AAR, which last month blocked an alliance with Rosneft to explore Russia’s Arctic waters.
Rosneft, Russia’s biggest oil company, said last month that it was interested in buying BP’s half of TNK-BP. Bloomberg