BP Earnings Fall on Lower Production and Higher Costs

The British oil giant posted operating earnings, adjusted for one-time items and inventory changes, of $4 billion for the three months through December, down from $5 billion a year earlier but ahead of analysts’ prediction of $3.3 billion.

Net income profit for the full year was $17.6 billion, down 19 percent from $21.7 billion in 2011.

The results reflect the extensive restructuring of the company that was forced by the 2010 Gulf of Mexico disaster. On October 22, BP agreed to sell its 50 percent stake in its Russian affiliate, TNK-BP, for about $27.5 billion in cash and shares to the Russian oil company Rosneft. As a result, BP’s fourth-quarter results include only 21 days of earnings from TNK-BP, which accounted for about 25 percent of BP’s output.

BP also took $4.1 billion in additional write-offs for the Gulf spill in the quarter, bringing the total provisions taken by year-end to $42.2 billion. The write-offs mostly reflect a settlement of criminal charges with the U.S. Department of Justice in connection with the spill.

Bob Dudley, who succeeded Tony Hayward as chief executive in the summer of 2010, has been trying to use the need to raise cash to pay for the after-effects of the spill as an opportunity to create a leaner, more profitable company. Including the TNK-BP sale, BP has agreed to roughly $65 billion in asset sales since 2010.

Mr. Dudley said last autumn, before the TNK-BP sale, that BP had sold half of its producing upstream platforms and a third of its wells, while trimming production only about 9 percent and reserves 10 percent.

“We will continue to see the impact of this reshaping work in our reported results in 2013,” Mr. Dudley said in a statement Tuesday.

Stuart Joyner, an analyst at Investec in London, said it would “take awhile” for Mr. Dudley’s strategy to work. Mr. Dudley is “selling assets and investing in new assets,” Mr. Joyner said, and the new acquisitions will not have an immediate payoff.

Despite Mr. Dudley’s efforts, uncertainty from the aftermath of the oil spill lingers. BP still faces a civil trial in New Orleans in late February that could result in penalties of more than $20 billion, according to analysts estimates.

BP’s stock remains down about 30 percent from where it was before the April 2010 oil spill, though it has risen 9 percent this year.

On January 16 militants attacked a gas field part-owned by BP in Algeria. Four BP employees were killed in the deadly attack on the In Amenas gas plant. The company says it “remains committed to operating in Algeria.”

Article source: http://www.nytimes.com/2013/02/06/business/global/bp-earnings-fall-on-lower-production-and-higher-costs.html?partner=rss&emc=rss