BP reports profit of $7.2 billion

LONDON — BP PLC posted a 16 percent rise in first-quarter net profits on Wednesday as gains from the sale of major assets to pay for the Gulf of Mexico oil spill outweighed the ongoing cost of that disaster.

But replacement cost profit, the measure most closely watched by analysts to indicate an oil company’s health, fell 2 percent as lower production and higher charges from the spill overrode the benefits of a rising crude oil price.

Net earnings of $7.2 billion for the three months to March 31 compared with $6.2 billion for the same period a year earlier. Revenue rose 18 percent to $88.3 billion after the company sold off more than $24 billion in assets to pay for the Gulf spill.

Those asset sales led to a fall in production, however, lowering replacement cost profit to $5.48 billion. The measure is closely watched by analysts because it excludes changes in the value of crude inventories and measures the amount it would cost to replace assets at current prices. It also excludes one-offs such as asset sales.

Chief Executive Bob Dudley has been targeting higher growth exploration to reverse a 30 percent drop in BP’s share price since the April 20, 2010, explosion on the Deepwater Horizon rig, which killed 11 men and caused the biggest offshore oil leak in U.S. history.

The stock price was up 0.6 percent at 467.05 pence ($7.68) in early trade on the London Stock Exchange.

The catastrophe in the Gulf caused BP to plunge to its first full-year loss in almost 20 years in 2010 and forced the resignation of chief executive Tony Hayward, who was at the helm when the disaster happened.

The first quarter results include a $400 million pretax charge for the oil spill, adding to $40.9 billion set aside by the company last year.

BP last week sued Transocean, the owner of the rig, and contractor Halliburton, for around $40 billion each in damages, based on its estimates of its liabilities.

But the court cases are likely to take years and BP could face tens of billions of dollars more in fines and penalties if it is prosecuted.

In the meantime, production levels have fallen as the London-based company sold oil fields and refineries and U.S. regulators banned further drilling in the Gulf of Mexico.

BP said that production for the first quarter was 3.58 million barrels of oil equivalent per day, an 11 percent drop on the first quarter of 2010. However, it said that fall shrank to 7 percent after adjusting for the effect of acquisitions and divestments and entitlement impacts in its production-sharing agreements.

Most of the decrease in production was weighted toward the company’s highest margin areas, and primarily reflected the impact to Gulf production because of the drilling moratorium, higher turnaround and maintenance activity in the North Sea and in Angola and an interruption to the Trans-Alaska Pipeline System.

Ranged against that production decline was a fire sale of assets, including a $7 billion deal with Apache Corp. that offloaded properties in the U.S., Canada and Egypt, that has so far brought in some $24 billion to help pay for the Gulf spill.

With its future in the U.S. uncertain, BP has signed energy exploration agreements in Indonesia, China, India and Australia. Most notably, it agreed to pay India’s Reliance Industries $7.2 billion for a stake in key oil and gas blocks.

However, its attempts to move into new ground hit a stumbling block in Russia. The company is seeking a $16 billion share swap with Russia’s state-backed OAO Rosneft but the deal was tied up in legal red tape after a dispute with BP’s shareholders in its other Russian venture.

A quartet of Russian billionaires, BP’s partners in the older TNK-BP venture, won an injunction in the London courts, claiming the new deal violates their own agreement with the London-based company.

BP gained some critical breathing room on the Russian problem just hours before its annual general meeting last week when Rosneft agreed to move the deadline to complete the deal to May 16.

The company also announced Wednesday that it would pay a dividend of 7 cents per share in June, half the size of the dividend it paid out to shareholders for the same quarter in 2010.

The company suspended its dividend for nine months following political and public pressure, reinstating a 7 cent per share payout for the final quarter of 2010. The BP dividend has wider significance in Britain, where it accounts for one pound in every six invested by pension plans.

Including the impact of the Gulf spill, net cash provided by operating activities for the first quarter was $2.4 billion, compared with $7.7 billion in the same period of last year.

16 Comments

  1. HEAD IN SAND

    POOR BP I FEEL SORRY FOR THEM BECAUSE OBAM WAS SHAKING THEM DOWN-REP BARTON. I WONDER WHAT BARTON WOULD SAY NOW. BARTON AND HIS GANGS WOULD NOT STOP $4 BILLION OIL SUBSIDIES TO BIG OIL COMPANIES. WHY ON EARTH DO THE AMERICAN TAX PAYERS HAVE TO SUPPORT THESE BIG OIL COMPANIES WHO PAY AHRDLY ANY TAXES AT ALL? WELL I GUESS I WOULD LEAVE THAT TO THE TEAPUBLICAN PARTY PEOPLE.

    #1
  2. MrProgressive

    …and the republicans want to keep spending our tax money on subsidies for these mega corporations. John Boehner said he’d be willing to look into ending them, then his office walked that statement back a few hours later. The USA spends almost 4 times more money on corporate welfare than we do on social welfare, giving our tax dollars to companies that don’t need it. For those of you who say that it will add dollars to the price of gasoline, do the math. Ending them would add less than 1/2 cent per gallon to the price of gas. End all corporate welfare!

    #2
  3. Clay

    I think it reasonable to suspend the $4 Billion oil company susidies at least for now.

    #3
  4. Indianpaintbrush

    Well, that certainly didn’t take long… As I read the article, I thought, ” how long before the oil haters seize upon the headline and start spouting off before comprehending the article?”
    Oil companies DO pay taxes and a lot of them. In fact that rainy day fund that the liberals want to spend was created with taxes and royalties from the oil companies. The $4 billion tax break that is under discussion now is but a piece of the taxes and royalties that oil companies pay to state and federal government.
    It’s easy to show an over year rise in revenue when one sells much of one’s assets. Do you not remember that last year, immediately after the disaster, BP showed a loss from the previous quarter? When it comes time to replace those assets and to settle all lawsuits, it will be interesting to see how that affects the bottom line.

    #4
  5. Duh

    Destroy the earth. Make some money.

    #5
  6. Spendmoney

    BP last week sued Transocean, the owner of the rig, and contractor Halliburton, for around $40 billion each in damages, based on its estimates of its liabilities.
    ….
    Interesting that the damage to BP is in the billions but the damage to the Gulf is nothing. The loss of oil is damage to BP but not when it goes into the Gulf. When the spill was ongoing the loss oil was minimal and not reported as very significant. Now the spill is over and we have, massive losses. Why were there no reports on the serious level of the spill, up front by BP. BP can recoup it’s alleged losses from other companies, but what can be done for the Gulf. Nothing.

    #6
  7. Tex

    The problem is that the oil company haters (e.g. Steffy) spew before they comprehend and think. As a matter of fact, most of them could probably not spell the word “oil”. Suggest they get help and research what the rate of return is on invested capital in some of the core businesses in this country. Big oil is certainly not on the top.

    #7
  8. Trail Trash

    I wonder how many are aware that Sen. Obaman voted for the 2005 Energy Bill which granted the tax breaks that he is now so critical of. Kind of like Kerry, he was for it before he was against it.

    #8
  9. jas

    what a slap in the face to we american’s that are paying these high gas prices just so these corporations can rake in billions and then post it on the front page, yep just another slap in the face…shall I turn the other cheek…

    #9
  10. Trail Trash

    The “subsidies” which the liberals are so critical of were at the time of their passage a part of a larger legislative moment toward energy independence and security. I guess the liberals now want to cripple the oil industry and put the energy security of the US back in the hands of the Saudis.

    #10
  11. john hemenway

    7.2 is what they report…..don’t make it so. Imagine……a large company lying…..say it ain’t so!
    I don’t believe a word that comes out of the energy industry…..ever.

    #11
  12. NMTexan

    Great news, my IRA has oil company stock as do most state’s retirement funds. Couldn’t be happier.

    #12
  13. OK

    The oil companies are not evil. However, people are very justified at demanding an end to their subsidies in the current fiscal crisis. BP, in particular, should have to step to the very back of the line for granting of drilling permits. All non-American based oil companies should have to get in line behind American companies for drilling permits. Now you can call me anti-oil, a hater and whatever other pet names you have. But I am pro-American before all else which is more than can be said for the ignorant “praise all oil” types.

    #13
  14. mikey

    Cut the $4b tax breaks and watch gas prices go even higher when these companies just pass that cost onto Americans wallets…. we lose either way. Move closer to work and stop driving so much… thats what I do.

    #14
  15. Tex

    OK,
    Who do you think owns “big oil”? Do some basic research and you will find that the owners are spread accross the globe. Do you think the owners of Exxon reside in Texas? Is your brother’s name Steffy? Dream on bubba and don’t give me your pro-American BS.

    #15
  16. eiioi

    john hemenway wrote:
    “7.2 is what they report…..don’t make it so. Imagine……a large company lying…..say it ain’t so!
    I don’t believe a word that comes out of the energy industry…..ever.”
    ————–

    Imagine a conspiracy theorist posting unsubstantiated theories on a blog.

    You have no skin in the game: if you lie there are no consequences. If they lie in their SEC filings, they get fined and someone goes to jail.

    Whom am I more inclined to believe?

    #16