BP has released its earnings for the third-quarter to show net income rising to $5.4 billion from $5 billion in the same period of 2011.Â
BP will raise its quarterly dividend by more than 12 percent, to 14.4 cents per share.The upstream segment’s underlying third-quarter replacement cost profit before interest and tax was $4.4 billion for the quarter, compared with $6.3 billion a year earlier and $4.4 billion in the second quarter. The company cited a weaker price environment as the underlying cause with Brent trading on average around $4 per barrel lower than a year ago, and Henry Hub trading at an average of $1.40 lower.
Production also fell 3% due to divestments and entitlement impacts in the company’s production sharing agreements, natural field decline and the seasonal impacts of maintenance activity. However; major project start-ups, improved operating performance in Angola helped to offset the decline.
Non-cash costs also increased from the previous year, due to higher depreciation, depletion and amortization associated with new high-margin projects and higher decommissioning costs.
According to Brian Gilvary, BP’s Chief Financial Officer; “Major project production ramp-up and the completion of turnaround activity in the Gulf of Mexico were offset by seasonal maintenance activity in the North Sea and Alaska, and the impact of Hurricane Isaac in the Gulf of Mexico.”
But he expects fourth quarter production to be higher than the third quarter as the company exits the maintenance season and the major project start-ups begin to mature. However, the company is expecting 2012 to be broadly with in line with 2011 with reported production to be lower than the previous year due to the impact of divestments which it estimates to be around 120,000 barrels of oil equivalent per day.
Within its downstream segment, underlying replacement cost profits for the quarter reached a record level of $3 billion, up from the $1.7 billion for the same period last year and $1.1 billion for the previous quarter. This company’s refining marker margin rise to an average of $19.50 per barrel for the quarter, the highest third quarter since 2005, driven by refinery closures in the Atlantic Basin and low gasoline and diesel inventories globally. However, the company expects season trends to bring refining margins down in the fourth quarter.
BP’s lubricants business saw replacement cost profit rise to $310 million, a significant climb from the same period last year whereas its petrochemicals business $20 million from the previous year to $215 million.
Costs and provisions associated with the Gulf of Mexico oil spill increased by $60 million bringing the total cumulative net charge for the incident up to $38.1 billion.
Over the quarter, BP has struck deals to sell $11 billion in assets, bringing total asset sales to $35 billion since the start of 2010, $3 billion away from 2013-end goal. This excludes the company’s decision to sell its 50% interest in TNK-BP to Rosneft for around $17.1 billion in cash and an approximate 12.84% interest in Rosneft. The company will also acquire an additional 5.66% stake in Rosneft from the Russian government, combined with its existing 1.25% interest, the company will hold a 19.75% share of earnings, production and reserves on an equity basis.
The company expects that it will deliver more than 50% growth in operating cash flow by 2014, assuming an oil price of $100/bbl. Payments into the Trust Fund are expected to end in the fourth quarter and BP’s 15 hi-margin upstream projects remain on track. The company plans to use around half of the extra cash for re-investment and half for other purposes including shareholder distributions.
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