BP Profit Drops; Says No Hit from Russia Sanctions
BP PLC posted a big fall in third-quarter profit from a year earlier, giving the first indication of how big oil companies are weathering falling oil prices.
BP’s third-quarter replacement-cost profit–which is similar to net profit under U.S. generally accepted accounting principles–was $2.39 billion, down from $3.18 billion in the same period last year. Based on a poll of 10 analysts conducted by The Wall Street Journal, replacement cost profit was forecast at $2.81 billion.
The U.K. oil giant said net profit fell in the quarter ended Sept. 30 to $1.29 billion, compared with $3.5 billion a year earlier. BP declared a dividend of 10 cents a share.
Oil prices have fallen sharply since mid-June, when they were buoyed amid concerns about the Middle East, dropping below $80 a barrel on Monday.
BP said that to date, Russian sanctions have had no material adverse impact on the company.
Reported production for the quarter was 2.15 million barrels of oil equivalent per day, 2.7% lower than the third quarter of 2013. It had warned last quarter that production would decline partly because of maintenance.
BP added that depending on weather and the closing of the Alaska package sale to Hilcorp, fourth-quarter reported production is expected to be slightly lower.
Profit in the company’s exploration-and-production division, known as “upstream,” was down from a year earlier. Profit in processing, or “downstream”–a business that tends to benefit from a lower oil price since it decreases the cost of raw materials–was $3.31 billion, compared with $4.16 billion last year. Group revenue was slightly lower at $93.9 billion, compared with $96.6 billion in the third quarter of 2013.
BP has been selling assets since the 2010 Deepwater Horizon disaster, which killed 11 workers in the Gulf of Mexico and results in the biggest offshore spill in U.S. history. The company has paid more than $40 billion in legal and cleanup expenses, and is continues to fight in U.S. courts to limit further payments.
The company said that as of Sept. 30, all of the money in a $20 billion trust fund it had set up for claims by people harmed by the disaster had been allocated, and further costs from such claims “will be charged to the income statement.” A BP spokesman said that while all of the money has been allocated to specific categories of claims, about $6 billion remains in the fund to be paid out.
Banco Santander analyst Jason Kenney said he does not expect “significant chargeable costs” for further civil claims.
Source: Bloomberg
