BP lifts cost estimate as Q2 earnings disappoint

LONDON: BP Plc, Europe’s second-biggest oil company, said yesterday that secondquarter profit dropped more than analysts expected and it increased the estimate of Gulf oil spill costs.

Earnings adjusted for one-time items and inventory changes fell to $2.7 billion from $3.6 billion, the company said in a statement.

That missed the $3.4 billion average estimate of 13 analysts in a Bloomberg News survey.

While the results were hurt by weaker oil prices, higher tax rates and lower income from Russia, chief executive Bob Dudley said the company ‘‘is making progress on bolstering output from its most profitable regions three years after the blowout at the Macondo well in the Gulf of Mexico.’’

The company lost a bid this month to halt payments to spill victims that it says are being unjustly awarded and yesterday raised its provision for the accidents total cost to $42.4 billion.

‘‘The loss claims have really been misinterpreted from the agreement that we signed in good faith,’’ Dudley said in a Bloomberg Television interview. ‘‘We’re going to fight this.’’

BP is still down more than 25% since the Gulf spill started in April 2010. Tax Rate BP’s effective tax rate was unusually high at 45% in the quarter, compared with 35% a year earlier, in part because of the effect of the stronger dollar on a basket of currencies, the company said.

Since the spill, Dudley has completed a $38 billion asset sale programme a year ahead of schedule and repositioned the company in Russia by selling BP’s half of the TNK-BP venture. The deal left BP with about 20% of state-backed OAO Rosneft and $12 billion in cash, most of which will be used to buy back $8 billion in shares. The company has repurchased about $2.4 billion in stock so far.

Lower oil prices in the second quarter pushed down revenue. Brent crude averaged $103.35 a barrel in the period, 5% lower than a year earlier. BP’s production of oil and gas outside Russia slipped 1.5% from a year earlier. Adjusted for the impact of asset sales, output grew 4.4% from a year earlier, the company said.

Income from Russia was hurt by the depreciating rouble and the lagged effect of a duty on oil exports, BP said.

Global production was 3.2 million barrels of oil equivalent a day, BP said. On July 19, a judge refused to temporarily halt payments from the court-supervised settlement while Louis Freeh, the former director of the Federal Bureau of Investigation, probes allegations of misconduct in the programme. Spill Costs BP contends two lawyers working for the settlement administrator, Patrick Juneau, improperly took fees from law firms while processing their clients claims. The staff attorneys were ousted after the alleged improper payments came to light.

BP says it has been forced to add hundreds of millions of dollars to the initially estimated $7.8 billion cost of the settlement. Today it increased the charge for that settlement to $9.6 billion to reflect the cost of claims and litigation in the second quarter. That doesn’t include future claims, which BP says cant be reliably estimated.