BP blames tough conditions in refining business and chief executive’s ‘shrink to grow’ policy in wake of Gulf oil spill
Profits at BP have fallen further than expected after the company was forced to sell some of its oil fields to pay for the Gulf of Mexico disaster fund.
Replacement cost profits – which exclude the effect of oil and other price movements – were down $680m, or 14%, to $4.8bn compared with $5.48bn in the same period last year, with bosses admitting profits will continue to fall in the next quarter.
BP blamed tough conditions in its refining business and chief executive Bob Dudley’s “shrink to grow” policy of investing in new projects rather than focusing on more mature areas.
Shares in BP dipped in early trading by 3.38%, down 15p to 430p, but later recovered to 434.7p.
The drop in profits was greater than analysts’ expectations of $5.1bn.
Chief executive Bob Dudley said the results were encouraging: “We have made a good start against our strategic priorities for 2012.”
The price of oil is 12.5% higher than a year ago, at $118.60 a barrel, compared with $105.42 a year earlier.
But like some of its rivals, BP was unable to capitalise on the higher price, with oil and gas production down 6%, excluding its Russian venture TNK-BP, to 2.45m barrels a day.
Keith Bowman at Hargreaves Lansdown said the results were mixed.
He added: “Like rivals Exxon and Chevron, BP has failed to take advantage of the higher oil price. For BP, the Gulf of Mexico accident continues to overhang, with asset sales impacting production.
“On the upside, planned asset sales are 60% complete, new exploration projects continue to be pursued, while the costs, at least for now, for the Macondo accident are reducing.”
BP also revealed it has paid $8.3bn to individuals and businesses in relation to the 2010 Deepwater Horizon disaster which left 11 dead, and its divestment programme to cover its costs from explosion and oil spill now stands at $23bn.
It has so far paid $16.6bn into a trust fund and expects to meet its target of $20bn a year earlier than planned.
A spokesman denied the company was making a more general pullback from the region, saying the disposals reflected a new strategy of churning assets more quickly and focusing on larger, younger projects.
However, it has been suggested that the company is not re-investing quickly enough and may see profits falling further.
The US department of justice is also investigating possible criminal and civil charges against BP that could lead to fines of more than $20bn, although the company expects fines of only around $3.5bn.
Royal Dutch Shell last week reported a 16% rise in underlying profits, while US rival ConocoPhillips reported a 1% drop and industry leader Exxon Mobil reported an 11% fall.
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