Oil giant BP Plc (BP: Quote,BP_UN.TO: Quote,BP.L) reported Tuesday a significant loss in its second quarter, hurt by $3.45 billion charges related to impairments and Gulf of Mexico oil spill. Underlying replacement cost profit plunged on weaker oil and U.S. gas prices as well as lower production. Looking ahead, the company expects lower production in the third quarter and full year 2012.
In London, BP shares lost 18 pence or 4.05 percent, and currently trading at 426.45 pence.
Noting that the earnings quarter was weak, BP group chief executive Bob Dudley said, "The effects of price movements have impacted our earnings in the quarter. Our extensive turnaround and maintenance programme, which will continue into the third quarter, is also affecting some aspects of our near term results."
"We are making progress against the critical strategic and operational targets we have set ourselves and are confident that this will deliver long-term, sustainable value," he added.
For the quarter, the oil company's pre-tax loss was $1.82 billion, compared with last year's profit of $8.23 billion.
Adjusting for inventory holding losses, replacement cost or RC profit attributable to BP shareholders was $238 million, sharply lower than prior year's $5.41 billion.
The latest-quarter results were hurt by non-operating items of $3.45 billion, including impairments losses, relating primarily to certain refineries, US shale gas assets and the decision to suspend the Liberty project in Alaska. There was a pre-tax charge of $847 million related to the Gulf of Mexico oil spill.
Underlying RC profit, excluding items, was $3.69 billion, lower than $5.71 billion in 2011. Underlying RC profit per American Depository share or ADS fell to $1.16 from $1.81 last year.
Total revenues and other income fell to $94.89 billion from prior-year's $103.95 billion, mainly due to sharp decline in sales and other operating revenues as well as lower earnings from associates.
BP said earnings were depressed by weaker oil and U.S. gas prices together with reductions in output due to extensive planned maintenance, particularly affecting high-margin production from the Gulf of Mexico.
Sharply lower net income from its 50:50 Russian joint venture TNK-BP due to rapid fall in oil prices as well as the lag in Russian oil export duty also hurt the results.
BP is currently in the process of selling its stake in TNK-BP, and in talks with its JV partner Alfa-Access-Renova or AAR, a consortium consisting of a group of Russian billionaires, as well as Rosneft (ROSN.L).
In the upstream business, production of oil and gas, excluding TNK-BP, averaged 2.275 million barrels of oil equivalent per day, 7.4 percent lower than last.
Further, BP announced a dividend for the quarter of 8 cents per ordinary share or $0.48 per ADS, higher than last year's 7 cents.
Looking ahead, the company expects third-quarter production to be slightly lower sequentially. Production will increase in the fourth quarter as it comes out of the summer maintenance season and continue to see the impact of major project start-ups.
Meanwhile, production for the full year will be lower due to the impact of divestments. Excluding TNK-BP, the company continues to expect flat production.
"Moving into 2013, we expect earnings momentum to build as we complete payments into the Trust Fund, as high-value production comes back on line, and as the impact of new projects ramps up," Dudley said.
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by RTT Staff Writer
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