Underlying profit at BP for the second quarter of 2012 slumped 35% compared to the same period in 2011, according to results released by the British supermajor today.
The company recorded a headline net loss of $1.4 billion compared with a profit of $5.7 billion for the same period in 2011, after taking massive $5 billion impairment on its shale gas assets.
On a replacement cost profit basis, BP made $238 million for the quarter, down from $5.4 billion a year earlier. Net debt at the end of the quarter was $31.7 billion, compared with $27.0 billion a year ago. On an impairment-free basis, profit was $3.69 billion, down 35% from $5.71 billion in Q2 2011.
The results dramatically undershot analysts expectations. Shares are down 2.79% in early trading on the London Stock Exchange to 432p at the time of writing.
US operations were a particular weakness, with BP posting a loss of $1.6 billion loss in upstream activities and of $2.0 billion loss in downstream. BP said its profits were reduced by the decision to suspend its Liberty offshore oil project in Alaska.
Outside the US, BP made adjusted profit of $4.75 billion, taking a $700 million hit on its TNK-BP earnings, which it says is “driven by the impact of the rapid fall in oil prices amplified by the lag in Russian oil export duty,” leading to a gap between the price on which duty was paid and the price for which TNK-BP’s oil was sold.
BP is currently battling AAR, its partners in the venture, over the payment of a $1 billion dividend for the year.
In addition to impairment items, BP attributed the profit cut to lower production and a reduction in the oil price over the quarter. BP’s production of oil and gas, excluding TNK-BP, averaged 2.275 million barrels of oil equivalent per day (mmboed) in the second quarter, compared to 2.457 mmboed for the same period last year.
The company says maintenance commitments will keep production mooted in the third quarter.
BP chief executive Bob Dudley said: “We recognise this was a weak earnings quarter, driven by a combination of factors affecting both the sector and BP specifically.”
“The effects of price movements have impacted our earnings in the quarter,” Dudley added. “Our extensive turnaround and maintenance program, which will continue into the third quarter, is also affecting some aspects of our near term results.”
Over the quarter, Brent traded at an average of $8.75 per barrel lower than a year ago, and Henry Hub traded at an average of $2.11 per mmBtu lower than a year ago. Shell and ExxonMobil also undershot analyst’s estimates for the quarter.
BP continues its $38 divestment program, which it still hopes to complete by the end of next year in order to foot . Divestments so far total $24 billion.
Dudley, who has been under shareholder pressure to reveal a convincing reinvigoration strategy for BP, said ““rebuilding trust with our shareholders and other stakeholders is vitally important.”
Dudley expect s earnings momentum to build in 2013, as the company completes its payments into the Gulf of Mexico trust fund related to the Macondo well disaster, high-value production comes back on line, and new projects ramp up.
BP says it has so far paid $8.8 billion in claims and government payments related to the Macondo blowout and oil spill, and paid $1.25 billion to the spill trust in the second quarter.
