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 In a sign it was hunkering down for an extended period of lower oil
prices, the British oil and gas company also cut its planned
full-year capital spending again to "below $20 billion", after
cutting it 13 percent to $20 billion earlier this year.
BP reached an $18.7 billion settlement with the U.S. government and
five states this month to resolve most claims from the oil spill
five years ago, the largest corporate settlement in U.S. history.
While BP had been expected to take a $10 billion charge for this at
some point, it said on Tuesday it had also agreed to pay up to $1
billion to resolve claims from local government entities, taking
cumulative pretax charges for the Macondo rig explosion and spill
that killed 11 workers to $55 billion.
As a result, the company took a pretax charge of $10.8 billion in
the second quarter, including a $9.8 billion charge related to the
government settlements.
Profits were also hit by a $600 million exploration write off in
Libya as a result security issues, leaving underlying replacement
cost profit, BP's definition of net income, at $1.3 billion, below
analysts expectations of $1.64 billion.
BP also raised costs linked to restructuring following the oil price
slide to $1.5 billion from the $1 billion announced in December.
"The external environment remains challenging," Chief Executive
Officer Bob Dudley said in a statement.
BP shares traded 1 percent higher in London at 0830 GMT
outperforming a 0.6 percent gain for the European oil and gas sector
index <.SXEP>.
"BP's earnings were weak as second-quarter production was weaker
than we had expected, but the market will take the (capital
spending) cut positively," said Anish Kapadia, analyst at investment
bank Tudor, Pickering Holt and Co.
REFINING BOOST
In a repeat of first-quarter trends, BP's refining and trading
division, known as downstream, performed strongly while production
delivered weak results amid falling oil prices.
Downstream generated $1.63 billion in replacement cost profit for
BP, up from $933 million a year earlier but down from an
exceptionally strong $2.08 billion in the first quarter.
Oil prices averaged $60 a barrel in the second quarter, up about $5
a barrel from the first quarter but down from $110 a year earlier.
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For the third quarter, BP said it expected "reduced refining margins
and lower levels of turnaround activity".
BP's upstream operations delivered a replacement cost profit of just
$228 million versus $4.05 billion a year earlier and $372 million in
the first quarter.
BP's global refining margin benchmark rose in the second quarter to
$19.4 a barrel from $15.55 a year earlier and from $15.3 in the
first quarter.
As a rule of thumb, each $1 in refining margins equates to around
$500 million in BP's pretax replacement cost operating profit,
according to the company.
BP said its second-quarter results reflected the impact of continued
low oil and gas prices, and a reduced contribution from its 19.75
percent stake in Russia's Rosneft <ROSN.MM>.
BP's net cash flow significantly recovered to $6.3 billion from $1.9
billion in the first quarter. BP also sold $7.4 billion of assets as
part of a $10 billion divestment program.
BP maintained its dividend at 10 cents per ordinary share.
Norwegian oil major Statoil <STL.OL> posted higher-than-forecast
earnings on Tuesday and also said it was lowering its capital
spending outlook for the year.
(Editing by Jason Neely and David Clarke)
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