January 27, 2023

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

Chicago News Cooperative: Community Is Torn Over Expansion of Oil Refinery

Now BP, the British oil giant, owns the century-old Standard refinery, the largest inland oil refinery in the United States. And Mr. Kozel, who still lives in northwest Indiana and is president of a citizens group called the Calumet Project, still worries that it will harm his health. He and other residents of the area are especially concerned now that the refinery is undergoing a large expansion to process more Canadian tar sands oil by 2013.

Across the Midwest, refineries like BP are expanding to process the tar sands oil — heavy, gooey oil mixed with sand in vast deposits that will be shipped via pipeline from Alberta. Tar sands oil is expected to be a staple of this country’s energy future.

Opposition from citizen and environmental groups and citations from the federal Environmental Protection Agency mean BP will now most likely have to install cutting-edge pollution-control equipment that BP officials and environmental lawyers say will make the BP facility a model for other refineries.

Environmental groups are pushing BP, and the two are close to agreement on a consent decree designed to limit the effect of the refinery expansion. But even as environmentalists take on the oil giant, they are finding that they must also make their case to local residents, who want jobs more than they worry about new pollution, Mr. Kozel and other local leaders said.

In the face of a slow economy, BP’s expansion is creating jobs on the southern rim of Lake Michigan, an area full of heavy industry and home to some of the worst air quality in the United States. The project will create about 5,000 construction positions, the company said, and 80 to 100 permanent jobs.

Chicago politicians and advocates for the Great Lakes raised a huge outcry in 2007 when Indiana officials granted BP a new permit that would allow it to release significantly increased amounts of ammonia and suspended solids, or sludge, into Lake Michigan as part of the expansion. The controversy eventually died down after BP promised not to exceed the limits of its previous permit.

Scott Dean, a BP spokesman, said he was confident that the company would not increase discharges into the lake.

Even so, the water permit that drew the ire of then-Mayor Richard M. Daley and then-Representative Rahm Emanuel remains in place. Environmentalists are calling for a legally binding commitment that BP will not exceed the prior limit.

Concerns about the discharges into the lake are but one issue for environmentalists as the $3.8 billion expansion moves toward completion in two years. Because tar sands are much heavier and contain more sulfur than conventional oil, they must be diluted with a volatile natural gas product to make them sufficiently liquid to be shipped. Once they arrive at Whiting, these toxic compounds need to be removed and disposed of during refining.

Environmental groups appealed the air permit that Indiana granted BP in 2008, saying it omitted expected increases in emissions, particularly from flaring, the burning off of toxic gases that shoots flames into the sky. The E.P.A. agreed and in 2009 ordered the state to redo the permit.

Now Indiana authorities, the E.P.A. and environmental groups are negotiating a consent decree governing BP’s air emissions, which include volatile organic compounds, particulate matter, sulfur dioxide, benzene, lead and other pollutants linked to higher rates of cancer, respiratory disease or other ailments.

In its permit application, BP said the expansion would actually reduce its total air emissions, since the company was installing modern technology across the refinery and shutting down some old equipment.

In the challenge filed with the Indiana Department of Environmental Management, environmental and citizens groups essentially accused BP of making calculations designed to misrepresent the effect of the refinery expansion. The environmental groups argued that BP’s calculations did not include increased flaring or new procedures needed to process tar sands oil, while at the same time the company took credit for reduced emissions from equipment that had been shut down years ago.

klydersen@chicagonewscoop.org

This article was made possible by a grant from the Dennis A. Hunt Fund for Health Journalism, and was produced as part of the California Endowment Health Journalism Fellowships, a program of the Annenberg School for Communication Journalism at the University of Southern California.

Article source: http://feeds.nytimes.com/click.phdo?i=3a492feaafa24b6fd81524b270279f3b

Memo to Exxon: Business With Russia Might Involve Guns and Balaclavas

A day after Exxon, the American oil giant, struck a strategic alliance with Russia’s state-owned oil company, police agents in Moscow staged a vivid reminder of what can happen to foreign petroleum partners that get on bad terms with the government.

Commandos armed with assault rifles raided the offices of the British oil company BP on Wednesday, in one of the ritual armed searches of white-collar premises that are common enough here to have a nickname: masky shows (so-called because of the balaclavas the agents often wear, although this time they reportedly burst in bare-faced.)

Whether the Russians intended to send a signal or not, the episode seemed to serve notice to Exxon that, when it comes to dealing with the state-run business world of Prime Minister Vladimir V. Putin, Exxon isn’t in Texas anymore.

“That incident, I’m sure, made Exxon very uncomfortable the day after they signed their deal,” Matthew Lasov, director of research at Frontier Strategy Group, a consultancy for companies operating in the developing world, said of the raid.

Exxon, though a spokesman, declined to comment.

BP, during its long involvement in Russia, has had so many police run-ins that its stock price often nudges up or down in response to raids or the arrests of employees. Russian oil and natural gas accounts for about a quarter of BP’s output — about the same portion as from the company’s fields in Alaska and the Gulf of Mexico.

Until now, Exxon’s involvement in Russia has not been as extensive as BP’s. But that could change, based on the joint venture deal Exxon signed Tuesday with the state company Rosneft to explore for oil in the Russian sector of the Arctic Ocean and in the Black Sea. Rosneft, in turn, is to gain access to Exxon operations, including oil fields in Texas and the Gulf of Mexico.

Partner beware was the watchword Wednesday in a note to clients by the Eurasia Group, another risk analysis organization.

“The politics of the Russian energy sector remain treacherous, as the 31st of August raid on BP’s Moscow office demonstrates,” the note said. Exxon, it said, “will now be deeply engaged in those politics for many years.”

Wednesday’s BP raid stemmed from a lawsuit filed by minority shareholders of the company’s Russian joint venture TNK-BP. They contend BP damaged their stock’s value by entering into a deal earlier this year with Rosneft that unraveled after opposition by the main Russian partners in TNK-BP. That debacle was an embarrassment to Prime Minister Putin, who had originally blessed the BP-Rosneft deal.

An arbitration court, a type of Russian civil court, in the Siberian city of Tyumen authorized Wednesday’s search of the Moscow offices, according to both BP and a lawyer for the minority shareholders. The target of the search was apparently documents subpoenaed in the lawsuit, which BP had balked at surrendering, according to Vladimir Buyanov, a BP spokesman.

The agents who raided BP’s offices on the 17th and 18th floors of the Lotte Plaza, a high-rise on Moscow’s Garden Ring, wore commando-style uniforms with yellow shoulder patches saying “Special Forces,” according to BP employees.

The agents were escorting two investigators from the Russian federal bailiff service, who were not armed. The police ushered employees out, and began rifling through papers.

Despite the assault rifles, “there was no great panic,” one BP employee said. “I was able to come up and get my keys” even after the armed men arrived.

The employee, who insisted on anonymity, described the armed police as polite and not overtly intimidating. “They were just a group of comrades with the badges of special forces, in black outfits, with assault rifles — nothing extraordinary.”

One policeman “slightly” pushed an employee with the butt of a rifle, to encourage him to get out of his chair faster, according to two employees who were present.

“We believe that these legal actions are without merit and appear to be part of a pressure campaign against BP’s business in Russia,” Jeremy Huck, the president of BP Russia, said in an interview.

It is not the first time BP has been the star of a masky show.

In 2008, the Federal Security Service, a successor agency to the K.G.B., arrested an employee in the headquarters of the TNK-BP venture, just up Arbat Street from the BP offices, on charges of industrial espionage that were later dropped.

That same year, labor and immigration authorities stripped visas and work permits from BP’s expatriate executives — including Robert Dudley, who was then the director of TNK-BP and is now BP’s chief executive. Mr. Dudley was compelled to leave Russia and run TNK-BP from an undisclosed location.

Whatever the legal issues, and the relative merits, foreign businessmen in Moscow have for years implored the government to refrain from conducting such raids in white-collar cases. Their protests have had little effect.

In February, masked and armed law enforcement agents raided Deutsche Bank’s main office in Moscow, looking for documents related to a commercial mortgage.

In November, masked police officers armed with automatic weapons raided a bank belonging to the billionaire Aleksandr Y. Lebedev, a part owner of the national airline Aeroflot.

“It’s fine to do business there,” Mr. Lasov, the risk consultant, said in a telephone interview from Washington. “But you should do business with those sorts of expectations.”

Article source: http://feeds.nytimes.com/click.phdo?i=b191c0376fcfef64b52f93dce88601cf

BP Offers Plan to Salvage Its Swap Deal With Rosneft

BP said it would agree to hand over a potentially lucrative exploration deal in the Arctic to its Russian joint venture, TNK-BP, in exchange for completing the share-swap, a move that would comply with a arbitration panel ruling released Friday. Any changes are subject to approval by Rosneft, which did not return calls seeking comment.

BP hopes the concession will end a three-month dispute with the Russian billionaires who are its partners in TNK-BP and who had opposed the Rosneft deal.

“This is a step in the right direction,” a spokesman for BP in London, Robert Wine, said. “It shows that there is an element of agreement.” BP’s shares rose 2.5 percent on Friday in London.

The partners had blocked BP’s $7.8 billion agreement with Rosneft, which included access to exploration blocks in Russia’s Arctic that might hold billions of barrels of oil. The partners argued that the deal breached their shareholder agreement with BP and demanded to be part of any new business in Russia.

BP’s deal with Rosneft initially lifted its shares because it promised to strengthen the British oil company’s position in the world’s biggest oil-producing country. It also guaranteed access to potential new oil reserves at a time of heightened competition and growing demand for oil. Handing the exploration deal to its joint venture would make it less profitable for BP.

The arrangement would cede some operational control over the venture in the Arctic Ocean to BP’s litigious Russian partners, even as BP contributed the technology to make it possible. The share-swap would still strengthen BP’s presence in Russia and could ease its participation in future oil deals.

It also highlights the significance of access to a site off Russia’s northern coast, given the lawsuits and environmental reviews stalling drilling on the other side of the Arctic Ocean in Alaska and Canada.

BP’s chief executive, Robert W. Dudley, came under pressure from some investors over the last month to find a solution to the standoff with the TNK-BP partners. The dispute had angered some investors, who had accused Mr. Dudley of misreading Russian politics and of failing to steer BP clear of difficulties so shortly after the oil spill in the Gulf of Mexico.

The company now has to seek approval from Rosneft to make the changes, which would include putting any shares that are part of the share swap in a trust. In that case, neither company would have any direct voting rights in the other. BP and Rosneft would also have no seats on each others’ boards.

Stan Polovets, chief executive of AAR, a firm that oversees the Russian partners’ holdings in TNK-BP, said his group welcomed Friday’s development. “We see the Arctic transaction with Rosneft as a great opportunity for TNK-BP and for Russia which we would like to succeed.”

He added that the “agreement provides a good way forward for achieving these priorities and opens the way to bring BP’s valuable expertise and technology to offshore exploration in Russia.”

BP’s Russian partners previously rejected cash offers from the company and said that its agreement with BP gave TNK-BP exclusive rights to pursue opportunities in Russia.

Despite the disagreements with its partners, TNK-BP remains a financial success for BP. After contributing about $6 billion in cash and assets to the founding of the TNK-BP venture in 2003, BP has since then made $14.3 billion in dividends from it, and it still retains 50 percent of the assets. The venture accounts for a quarter of BP’s production.

Andrew Kramer contributed reporting from Yekaterinburg, Russia.

Article source: http://feeds.nytimes.com/click.phdo?i=03fbd4bb8ab5d4d6b977451adc7d9e0f

DealBook: G.E. to Buy French Company for $3.2 Billion

6:18 p.m. | Updated

General Electric announced on Tuesday that it planned to spend $3.2 billion for a 90 percent stake in Converteam, a company based in Massy, France, that specializes in high-efficiency electric power conversion components like motors, generators, drives and automation controls.

The components are used across a variety of industries at the core of G.E.’s industrial and energy operations, including its oil and gas initiatives, as well as solar and wind power.

Under the agreement, which is expected to close during the third quarter of 2011, executives at Converteam would retain a 10 percent stake in the company, and management at both companies would buy any remaining shares over the next two to five years. In a statement, G.E. said the price for those shares would vary but would probably be no more than $480 million.

The move is the latest in a string of energy infrastructure acquisitions for G.E., which also picked up the well-support unit of the John Wood Group for $2.8 billion last month, as well as Wellstream Holdings, the British oil services company, for $1.3 billion in December. It also bought Dresser, a manufacturer and servicer of natural gas engines, fueling systems and other components, for $3 billion last fall.

Joseph R. Mastrangelo, a vice president with G.E.’s oil and gas division, said the acquisition would allow the company and its industrial and offshore oil and gas customers, for example, to readily replace inefficient fixed-speed drive technology with Converteam’s more flexible variable-speed systems, saving energy.

Converteam also makes converters that smooth the intermittency bumps that make solar and wind power difficult to integrate with other sources of electricity.

Roughly a quarter of the world’s electricity is used to turn rotating machines in all manner of industrial and power generating applications, according to General Electric. Making highly engineered components designed to make those processes as efficient as possible is an increasingly competitive — and lucrative — field, the company said. The sector was valued at roughly $30 billion last year, and companies like ABB, Siemens, Emerson Electric and Rockwell are trying to capture a piece of the market.

Many analysts agreed that the acquisition was in keeping with G.E.’s overall quest to expand its energy infrastructure operations — though some noted that Converteam’s earnings before interest, taxes, depreciation and amortization for 2010, about $240 million, were much smaller than the deal’s $3.2 billion price.

“It seems a bit expensive,” said Daniel Holland, an analyst with Morningstar. “The company has been very forthright about wanting to build out its exposure into more end markets, so it’s not entirely unexpected. It’s just a little bit on the pricey side, that’s all.”

Article source: http://dealbook.nytimes.com/2011/03/29/ge-to-buy-converteam-for-3-2-billion/?partner=rss&emc=rss