July 26 (Bloomberg) -- BP Plc, Europe’s second-biggest oil company, reported earnings that missed analyst estimates after field maintenance in the Gulf of Mexico, Angola and the North Sea cut production.
Net income of $5.6 billion in the second quarter compared with a record $17 billion loss a year earlier, the London-based company said today in a statement. Adjusted for one-time items and changes in inventory, profit was also $5.6 billion, compared with an average estimate of $5.9 billion in a Bloomberg survey of 12 analysts.
“It was a heavy maintenance period and production in the Gulf was down, while taxes were higher,” said Christine Tiscareno, an equity analyst at Standard & Poor’s in London. “They have their work cut out for them, but are doing the right things.”
Chief Executive Officer Robert Dudley is selling fields and disposing of half BP’s U.S. refining capacity to recover from last year’s spill. Splitting up the company could unlock as much as $100 billion for investors because its assets are worth more than its market value, JPMorgan Cazenove said this month.
BP fell as much as 2.9 percent in London trading, the steepest intraday decline since April. The shares were at 463.40 pence as of 8:12 a.m. local time.
BP shares are down 29 percent since the Macondo oil spill, compared with a 15 percent gain for larger rival Royal Dutch Shell Plc in the same period. Shell will probably report a profit of $6.6 billion on July 28, according to a separate Bloomberg News survey.
Production slipped 11 percent from a year earlier to 3.43 million barrels of oil equivalent a day, mainly due to the suspension of drilling in the Gulf of Mexico and the company’s divestments, it said. Higher turnaround times and maintenance also lowered output.
“We expect the momentum of our recovery to build into 2012 and 2013 as new projects come on stream, particularly in higher-margin areas,” Dudley said today. “We are committed to seeing the true value of the business more strongly reflected in out share price.”
Since taking over in October, Dudley has overseen the sale of $25 billion of fields in Argentina, Colombia, Pakistan and Vietnam. While freeing up cash for the company’s balance sheet, that also reduced the company’s output as oil prices gained.
The effective tax rate rose to 35 percent in the second quarter from 30 percent a year ago. The dividend was maintained at 7 cents a share.
Dudley’s plan is to focus on higher-growth fields and new discoveries. He signed a $7 billion deal with Reliance Industries Ltd. to explore offshore India, and planned an $8 billion tie-up with OAO Rosneft to explore Russia’s Arctic Kara Sea in January that was later blocked by the billionaire partners in the TNK-BP venture.
BP said that future cash flows will grow faster than output as more profitable production comes on stream. BP has yet to return to drilling in the Gulf of Mexico since President Barack Obama halted deepwater exploration in the wake of the spill. The ban was lifted Oct. 12.
Higher oil prices and more profitable refining supported BP’s second-quarter earnings. Brent crude prices averaged $117 a barrel in the second quarter, compared with $79 in the year-earlier period. As a rule of thumb, BP says that each $1 increase in the price of Brent will bolster profit by about $380 million a year, according to its website.
Global refining margins rose to an average of $13.92 a barrel in the second quarter from $11.04 year ago, according to BP’s refining marker margin.
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