Asset sales weigh on BP's Q4 earningsFebruary 4, 2014 @ 9:55 am
LONDON (AP) - BP PLC's fourth-quarter profits fell 30 percent as the asset sales that it has pursued to compensate victims of the Gulf of Mexico oil disaster reduced production.
The company said Tuesday that net income slid to $1.04 billion from $1.49 billion in the same quarter the year before. A number of factors were behind the decline, with lower production levels in the wake of the asset sales a key factor. Overall production, excluding Russia, fell 1.9 percent to the equivalent of 2.25 billion barrels of oil a day. BP said it expects production to decline this year because of the expiration of a concession in Abu Dhabi.
A drop in prices for refined products and costs related to new projects also weighed on BP's profits, despite strong results at Rosneft, the Russian company in which BP holds a 19 percent stake.
Still, Chief Executive Bob Dudley delivered an upbeat forecast, citing increased production in the North Sea, Angola and Gulf of Mexico and the completion of major projects for the production of crude oil and natural gas, as well as refined products such as gasoline.
Adjusted for the effects of divestments, the company said "underlying" production rose 3.7 percent.
"These achievements underpin our financial targets for 2014 and lay the foundation for continued growth in sustainable free cash flow," he said.
The Deepwater Horizon spill in the Gulf of Mexico continues to eat into earnings, though. Expenses related to the 2010 disaster cut pretax profit by $189 million in the quarter and $469 million for the full the year.
The explosion on the Deepwater Horizon drilling rig killed 11 workers and released millions of gallons of oil into the gulf, wreaking economic havoc and prompting environmental damage across several southern states.
BP has set up a $20 billion trust fund to compensate victims of the spill. As of Dec. 31, charges to the fund amounted to $19.39 billion, leaving $662 million that could be charged to the trust fund with no net impact on earnings.
The spill, which created a huge furor in the U.S., prompted the company to transform its business. It has sold off a little under $40 billion worth of assets in response, partly to fund the compensation schemes. More assets are expected to be sold over the coming couple of years.
Analysts say the overall numbers were largely in line with expectations.
"The Gulf of Mexico fallout is still not complete, although, all things being equal, the rump of the claims seem to be well provisioned," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers. "More positively, underlying production increased, net debt has fallen, and the company's transformation into a more lean and focused business is well underway, particularly given its divestment program."
BP shares were down 1.6 percent at 466 pence in London.
For the year as a whole, BP's profit more than doubled to $23.5 billion from $11 billion.
Closer to the company's home base, Dudley warned of the uncertainties of independence for Scotland, which is voting on whether to break away from the U.K. later this year. BP has resources, personnel and investments in Scotland, and Dudley told reporters at a press conference that there would be currency questions in the event of a yes vote.
"I think Great Britain is great," Dudley said. "And personally, that does not seem like the right thing to see that drift off. `'
(Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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