BP’s profits plummet due to falling oil price
BP’s upstream operations delivered a replacement cost profit of just $228m versus $4.05bn a year earlier, and $372m in the first quarter.
The first half loss was caused by a fall in revenue, the oil spill settlement, and non-operating charges.
BP added Tuesday that underlying replacement cost profit – a measure of earnings adjusted for one-time items and inventory charges – tumbled 64 percent to $1.3 billion as oil prices collapsed.
The settlement will take cumulative pre-tax charges for the Macondo rig explosion and spill that killed 11 workers to 55 billion dollars. That contrasted with net profit of $3.37 billion in the second quarter of 2014. The company also revealed it now expects restructuring costs to hit $1.5bn in 2015, compared with initial expectations of $1bn. However, this includes the Gulf of Mexico payout costs.
BP set the blame squarely on lower oil and gas prices.
“The earnings outlook remains challenging”, he said.
BP said it will maintain its quarterly dividend of 10.0 cents per share for the second quarter of 2015. Brent crude averaged $62 a barrel during the second quarter, compared to $110 during the same period a year earlier.
Though prices rebounded somewhat in the second quarter, they’ve fallen back in the past month after a nuclear deal with Iran raised the prospect of more supply in the coming months. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future.
The result also reflected the impact of the low oil and gas prices, a reduced contribution from its stake in Russia’s Rosneft, and one-off charges arising from circumstances in Libya, the company said in a statement.
“We can see clear progress in our capital programme and from our work to reset and reduce cash costs”.
BP’s chief financial officer Brian Gilvary warned that the slump in oil prices isn’t over yet.
Dudley said the company is responding by increasing efficiency and continuing “with capital discipline and divestments”.
Downstream generated $1.63bn replacement cost profit for BP, up from $933m a year earlier but down from $2.08bn in the first quarter.