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BP. Bp Plc

495.70
2.90 (0.59%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Bp Plc LSE:BP. London Ordinary Share GB0007980591 $0.25
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  2.90 0.59% 495.70 496.00 496.10 498.75 493.30 495.45 36,110,224 16:35:27
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Petroleum Refining 211.6B 15.24B 0.8934 5.55 84.61B

BP Swings to Loss in 2Q on Deepwater Deal, Low Oil Prices -- 3rd Update

28/07/2015 2:19pm

Dow Jones News


Bp (LSE:BP.)
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By Sarah Kent 

LONDON-- BP PLC swung to a $6.3 billion loss in 2015's second quarter, with low oil prices and a massive charge for settling the Gulf of Mexico spill battering the company's profits as it tries to chart a forward course.

The U.K. oil giant framed the $10 billion pretax charge as a necessary step to getting BP back on track after five difficult years since the Macondo well blew, killing 11 workers on the Deepwater Horizon rig and spewing millions of barrels of oil into the Gulf. The agreement announced earlier this month settles all claims by the U.S. federal government and five states, giving BP a measure of certainty over the size of its liabilities.

Less burdened by the Gulf spill, BP Chief Executive Bob Dudley said the company had an opportunity to plan for the future rather than constantly looking to the past.

"While the number is huge, it does mean we can plan now, which is a state we haven't really been in for the past five years," Mr. Dudley said.

But BP's financial results--the first second-quarter earnings reported by the world's biggest independent energy companies--pointed to substantial headwinds for a global oil industry that has been upended by crude prices that began nose diving a year ago.

Its replacement-cost loss of $6.3 billion--a measure similar to net income reported by U.S. companies--was down from a $3.2 billion profit in last year's second quarter. The losses were steepest in the oil exploration and production division known as upstream, which reported pretax earnings of $400 million, down from $4 billion a year earlier.

The results came as oil prices entered bear market territory again, resuming a slide that began a year ago when Brent, the global benchmark crude, traded at highs of $114 a barrel. It plunged to less than $50 a barrel by January and, after a brief rebound to the high $60s, was trading less than $53 on Tuesday.

BP executives said they expected oil prices to fall further, as global supplies of oil continue to outpace demand by large amounts every day. U.S. production has remained resilient, the Organization of Petroleum Exporting is pumping at near-record levels, and Iran could fully re-enter the export market next year when sanctions are lifted as part of a nuclear agreement with world powers.

Mr. Dudley called $100 a barrel "an aberration."

"It's a really tough time for the industry. It does feel like 1986," he added, referring to the oil price slump that hit the industry in the 1980s.

With prices so low, the company's new focus on the future won't amount to a significant shift in strategy. Mr. Dudley said the company would continue to contain spending while moving ahead with high-value projects, such as its fields in Russia, and implementing plans to increase natural-gas output.

It is also unlikely BP will follow the deal-making of its rival, Anglo-Dutch giant Royal Dutch Shell PLC, which bought BG Group PLC for $70 million this year.

"I think it would be unwise for BP to state it needs to go out and make acquisitions. I think we need to get our house in order," Mr. Dudley said.

For BP, it was the second quarterly loss in the past six months, reflecting how deeply the oil-price slide has affected its operations and the mounting cost the Deepwater Horizon spill continues to exact.

The one-time Deepwater Horizon settlement charge brings the cost of the spill to almost $55 billion for BP. It has sold off more than $40 billion in assets to raise cash and is moving forward with a plan to sell even more for oil-spill cleanup and legal costs. The company remains embroiled in lawsuits relating to the spill, but the deal settles the largest claims against the oil giant. Now it faces steady payouts totaling $18.7 billion over 18 years.

The company has slashed spending this year, delaying projects with reserves over 3.5 billion barrels of oil and gas--more than any other big independent energy company, according to Wood Mackenzie. Its free cash flow doesn't cover its dividend, which the company maintained at 10 cents a share.

Lower oil prices had a particular impact on BP's earnings from its stake in state-owned Russian oil company OAO Rosneft. Its underlying net income from the company fell by nearly 50% in the second quarter of 2015 to $510 million from $1 billion a year earlier. Its annual dividend from Rosneft fell to $271 million, down from $693 million last July.

Still, the company remains committed to Russia, attracted by the comparatively low costs of onshore production there. Last month, the company bought a 20% stake in an East Siberian oil company from Rosneft.

BP's upstream results were also affected by a $600 million charge relating to its exploration activities in Libya, where the company has been unable to operate because of political upheaval amid a continuing armed conflict.

Despite the tough environment created by low oil prices, BP did receive some support over the last quarter from its refining arm. Refineries have enjoyed months of extraordinarily high margins thanks to weak crude prices and rising demand. BP's downstream business, which includes refining and marketing, saw pretax earnings increase by nearly 75% in the second quarter to $1.6 billion compared with $933 million a year earlier.

Write to Sarah Kent at sarah.kent@wsj.com

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