BP profits fall to $4.8bn amid asset divestments

BP POSTED weaker than expected first-quarter profits of $4.8 billion, a big drop compared with last year, as asset divestments drove production lower.

The oil group said it was gradually re-establishing its presence in the Gulf of Mexico, two years after the Deepwater Horizon disaster, and expected to have eight drilling rigs operating there by the end of the year.

BP said its underlying replacement cost profit – a closely watched figure that strips out changes in the value of inventories and other one-off items – was $4.8 billion, compared with $5.5 billion last year.

The results show how BP is still affected by the aftermath of the Deepwater Horizon disaster, caused in April 2010 when a drilling rig it was leasing in the Gulf of Mexico blew up, killing 11 men and triggering the world’s worst offshore oil spill.

In March the company agreed to pay at least $7.8 billion to victims of the spill but still faces a trial over liability for the disaster with the US department of justice. Its share price is still 30 per cent lower than it was before the spill.

BP’s results contrasted with those of its rival Royal Dutch Shell, Europe’s largest oil company by market capitalisation, whose first-quarter profits beat expectations.

BP’s production was 3.47 million barrels a day, down 6 per cent year on year, as it continued to sell assets to pay for the disaster and to reconfigure itself as a smaller company more tightly focused on growth opportunities.

It also blamed the drop in output on the effect of the drilling moratorium in the Gulf of Mexico, partly offset by rising production from India and Angola.

BP said it expected production to fall again in the second quarter, due to shutdowns of some operations for seasonal maintenance.

BP chief executive Bob Dudley said the company had made a “good start” on its strategic priorities for 2012.

He said that during the quarter, BP had gained access to “significant new deepwater and US shale exploration acreage” and had five working deepwater rigs in the Gulf of Mexico. “This operational progress will underpin the financial momentum we expect to come through as we move into 2013 and 2014,” he said. – Copyright The Financial Times Limited 2012