News Column

BP Pretax Profit Up In Second Quarter, Falls In First Half

July 29, 2014

Tom McIvor

LONDON (Alliance News) - BP PLC Tuesday said its second quarter pretax profit increased against the previous year on lower costs but its first half pretax profit slumped year-on-year due to lower revenues and a fall in disposals gains.

The oil and gas giant said its first half pretax profit more than halved to USD11.14 billion for the six months ended June 30 from USD24.62 billion in the previous year as revenues and other income fell 7.0% to USD188,82 billion from USD202.92 billion.

The company said it revenues fell as production dropped 7.3% to 2,118 million barrels of oil equivalent per day leading to a downstream drop in revenues to USD171.17 billion from USD175.13 billion.

BP said the majority of its comparative losses came from much lower disposal gains, in the first half 2014 in posted disposal gains of USD379 million but in the same period the previous year, the company disposed of USD12.78 billion worth of assets.

In October 2013, BP announced plans to divest another USD10 billion in assets before the end of 2015, having completed a USD38 billion divestment programme in 2012. As part of the new plan, BP has so far agreed around USD3.4 billion in further divestments.

In its second quarter figures, the company made a 22% pretax profit gain to USD5.50 billion from USD4.49 billion in the same period the previous year despite a slight fall in revenues.

BP said its second quarter saw lower purchase costs, production and manufacturing expenses, exploration expenses and administrative expenses.

"This was another successful quarter, delivering both operational progress and robust cash flow. We are continuing to ramp up the major new projects that drive delivery of cash flow and are also now seeing benefits from our focus on operating with greater reliability and efficiency," Bob Dudley, BP chief executive said in a statement.

"This operational momentum keeps us well on track to meet our 2014 targets and underpins our longer-term commitment to grow distributions to our shareholders," Dudley added.

As such, the company paid out a quarterly dividend of 9.75 cents, which is an 8.3% increase on the previous year's quarter but the same as its first quarter.

During the second quarter, BP increased its provision for litigation related to the Gulf of Mexico oil spill by USD260 million, which means the total cumulative pre-tax charge for the incident to date is now USD43.0 billion.

Looking ahead, BP said it expects the third quarter to continue its trend of lower production than the previous quarter due to planned major turnaround and seasonal maintenance activities in Alaska and the Gulf of Mexico.

In its upstream fuels business, the company expects stronger margins in the third quarter compared to the second but sees challenges continuing at its upstream petrochemicals business.

The news comes after the company announced in February, that its pretax profit fell in its fourth quarter but increased significantly in the full year 2013.

BP said total revenues were up 2.1% in 2013 to USD396.22 billion from USD388.07 billion due to strong growth in underlying oil and gas production, particularly from key regions such as the North Sea, Angola and Gulf of Mexico.

BP announced in April that it intends to halt refinery operations at its major Bulwer Island refinery in Brisbane, Australia by mid-2015, as the Australian operations of major commodities players continue to struggle. It also announced in April, plans to sell interests in four BP-operated oilfields on the North Slope of Alaska to Hilcorp, a privately-held independent oil and natural gas exploration and production company.

In addition, the company could be hit by ongoing sanctions against Russia as part of the Ukraine crisis as amongst those hit by the extended sanctions announced earlier this year is Igor Sechin, chief executive of Rosneft OAO.

BP has a 19.75% holding in Rosneft, the world's largest extractor of natural gas, and it is unclear what the sanctions will mean for BP's operations in Russia and the US.

However, a spokesman for BP said in April that the company is "committed to our investment in Rosneft, and we intend to remain a successful, long term investor in Russia. We are considering today’s announcement to see specifically what this may mean for BP. We will of course comply with all relevant sanctions."

BP shares were up 0.6% to 500.00 pence, putting it amongst the top FTSE 100 risers during early trading on Tuesday.

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Source: Alliance News

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