BP Profit Misses Estimates on Libyan Write-Offs, Trading

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Statoil and BP Release Reports Amid Oil Declines

BP Plc reported second-quarter profit that missed analyst estimates after a trading boom faded and the conflict in Libya forced almost $600 million of writedowns.

Profit adjusted for one-time items and inventory changes dropped 64 percent from a year earlier to $1.3 billion, missing the $1.7 billion average estimate of analysts surveyed by Bloomberg. The net result, which included a charge for liabilities from the 2010 Gulf of Mexico oil spill, was a $6.3 billion loss.

The weaker-than-expected results pile pressure on Chief Executive Officer Bob Dudley to cut spending to maintain dividends. Europe’s third-biggest energy producer is no longer benefiting from the strong trading that added about $350 million to profit in the first quarter, while a halt to operations in Libya eroded earnings from oil and gas exploration.

“The miss is primarily because of the Libyan charge,” Jason Gammel, a London-based analyst at Jefferies Group LLC, said on Tuesday. “BP is restructuring costs and that’s working out well for them as oil continues to be lower.”

BP rose 1.4 percent to close at 392.65 pence in London trading after analysts from Jefferies and Morgan Stanley highlighted progress on cost cutting, while the Libyan write-off was a one-time impairment.

Spending Drops

Capital investment fell 20 percent to $4.7 billion in the quarter from a year earlier, according to BP. The London-based company, among global oil majors to suffer from the collapse in crude prices, lowered its spending forecast for the year to less than $20 billion after investing about $23 billion in 2014.

“Oil prices will be lower for longer,” Dudley said on a conference call with analysts. BP is focusing on investment discipline, operating performance, asset sales and dividends, he said.

Brent crude, a benchmark for more than half the world’s oil, has dropped about 50 percent in the past year amid a global supply glut. The impact on drilling costs will allow BP to increase production, Dudley said. Output is languishing at 3.1 million barrels a day, 23 percent lower than in 2009.

Adjusted profit before interest and taxes from oil and gas production and sales fell to $494 million in the quarter from $4.66 billion a year earlier, reflecting the lower prices and the Libyan write-offs.

Refining, Trading

Adjusted pretax profit from the downstream business, which includes refining and trading, was $1.9 billion, up from $733 million a year earlier but lower than the $2.2 billion in the first quarter. The contribution from oil trading returned to “average levels” in the second quarter, the company said.

As the first of the world’s five largest oil companies to announce earnings this quarter, BP puts investors on guard for a decline in profitability at its competitors. Royal Dutch Shell Plc, Total SA, Exxon Mobil Corp. and Chevron Corp. are all scheduled to report second-quarter results this week.

BP took a $10.8 billion charge in the quarter for liabilities related to the Gulf of Mexico spill, taking the total amount set aside for payments to more than $54 billion.

The company this month reached a record $18.7 billion agreement to settle all federal and state claims from the spill, the largest in U.S. history. The payments will be staggered over as many as 18 years with an annual maximum of $1.1 billion.

How Will BP Rebound From 64% Profit Decline?

On Monday, BP was ordered to start processing payments and was given 30 days to pay as much as $1 billion to local governments, according to the company.

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