BP profits dip as oil spill impact lingers
LONDON - British energy major BP, is still feeling the impact of the disastrous Gulf of Mexico oil spill and the consequent asset disposal programme, which has led to a dip in oil producing assets and thereby a hit in profits despite soaring global oil prices, the company admitted Tuesday.
BP's underlying profits were $4.8billion (2.95billion pounds) in the first three months of 2012, lower than market expectations of $5 billion, and a dip compared to $4.98billion (3.06billion pounds) profits in the previous quarter. The first quarter profits this year were an 18 per cent dip compared to $7.25 billion in the 2011 first quarter.
The group reported a 6 per cent decline in oil and gas production to 2.45million barrels of oil a day as its programme of asset disposals since 2010 climbed to $23billion (14.2billion pounds).
Brent crude oil prices averaged $118.60 a barrel in the past quarter, up from $105.43 a year before.
In order to pay for the clean-up and compensation costs from the Gulf of Mexico incident BP is aiming to sell off around $38 billion of its non-core assets by the end of next year; so far it has managed to raise $23 billion. Currently on the block are five of its fields in the Gulf of Mexico.
The sale of producing assets has led to a drop in oil production, which during the first quarter was 2,452m barrels of oil equivalent per day, that's 6% lower than the first quarter of 2011 although after adjusting for the effect of its asset sale, and production-sharing agreements, production increased slightly year on year.
In effect, BP is still doing pretty well. In Tuesday's update the firm cites a stronger performance in Angola and new production from India which it claims are offsetting the drop in production in the Gulf of Mexico.
Group chief executive Bob Dudley said: "We have made a good start against our strategic priorities for 2012. During the quarter we gained access to significant new deepwater and US shale exploration acreage, our ongoing divestment programme has reached $23 billion, and we have five deepwater rigs at work in the Gulf of Mexico. This operational progress will underpin the financial momentum we expect to come through as we move into 2013 and 2014."
The company's shares fell 11.05p to 433.95p in early trading and the selling continued with the shares hitting a low of 429p by mid-morning - a decline of nearly 3.5 per cent.
The company added that tough conditions in the oil refining business has led to a drop in profits at its refining units.
BP entered into concessions with oil firm Petrobras in Brazil in the first quarter, as well as deepening its interests in offshore Namibia and being awarded three new blocks offshore of Uruguay.
The firm said it remained on track to start up six new major upstream projects in 2012, with Clochas-Mavacola in Angola and Galapagos in the Gulf of Mexico expected to start in the second quarter.
"Looking ahead, we expect second-quarter reported production to be lower, and costs to be higher, as a result of normal seasonal turnaround activity concentrated on high-margin production in the Gulf of Mexico at Atlantis, Mad Dog and Holstein," the company said.
BP is still investing in its portfolio, organic capital expenditure for the first quarter was $5.44bn, significantly up on the $3.7bn spent in the first quarter of 2011.
Broker Oriel Securities said: "BP reported adjusted first quarter results that were 6 per cent below consensus (City forecasts) at $4.8billion and 8 per cent Oriel's estimate. However, the underlying upstream and downstream performances were in line with expectations.
"We retain our hold recommendation and expect the shares to be driven by the (U.S. Department of Justice) Macondo trial, the start of which should be determined at a meeting on 3 May."
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