British oil giant BP said in its third-quarter earnings report that the company is uncertain whether it will reach a settlement with the U.S. government for the 2010 Gulf of Mexico oil spill, and the company added its quarterly profit rose more than 5 percent despite a drop in revenue due in part to lower production of oil and gas.
The company, whose U.S. offices are based in Houston, said Tuesday profit for the three-month period came to $5.5 billion, compared to $5.22 billion a year earlier.
Revenue in the quarter came to $93.12 billion, a 4.7 percent drop compared to $97.73 billion a year earlier. Still, BP said it would increase its quarterly dividend to 9 cents per share, which is expected to be paid in the fourth quarter.
“The company continues to move through this transition,” CEO Bob Dudley told analysts and investors during a conference call. “It’s not been an easy transition.”
He noted that business and legal uncertainties have clouded the situation for BP, but the company is looking to move beyond that by focusing on its core strengths, which include exploration.
“I remain confident we are on the right path,” Dudley said.
Production of oil and gas in the quarter, excluding TNK-BP, was 2.26 million barrels of oil equivalent a day, 3 percent lower than a year ago, the company said.
As quarterly earnings reports roll out, major oil and gas companies are recording a hit to their bottom line because of sharply lower natural gas prices in North America and downtime at production and refining facilities due to hurricanes and seasonal maintenance.
BP PLC also confirmed in its earnings release that it is in ongoing discussions with the Justice Department and other federal agencies regarding a possible settlement related to the Deepwater Horizon disaster. It said it is ready to settle on reasonable terms, but unresolved issues remain and “there is significant uncertainty as to whether any agreement will ultimately be reached.”
BP could face up to $21 billion in Clean Water Act fines, alone, based on the amount of oil that was discharged — some 206 million gallons, based on government estimates — and the U.S. allegation that BP was grossly negligent.
Eleven rig workers were killed when the Transocean-owned Deepwater Horizon rig exploded after an undersea well owned by BP blew out, spurring the worst offshore oil spill in U.S. history. It took nearly three months for BP to cap the well.
Meanwhile, BP has been selling off assets to pay for its oil spill obligations and to refocus its portfolio.
Last week, BP announced that it had agreed to sell its share of Russian oil company TNK-BP to state-controlled rival Rosneft for a mixture of shares and cash.
Combined with BP’s existing 1.25 percent share, the proposed sale would result in BP holding a 19.75 percent interest in Rosneft and receiving $12.3 billion in cash. The deal is expected to close in the first half of next year.
“Our venture has now run its course,” Dudley said Tuesday.
BP will continue to be a major player in Russia through the Rosneft deal, and it also is looking to maintain its presence in the Gulf of Mexico. Dudley said the company is currently operating seven rigs in the Gulf, with another one preparing to go.
“The vision for BP is for a focused company,” Dudley said.
BP reported a nine-month profit of $10.14 billion, compared to $18.32 billion a year earlier. Nine-month revenue totaled $284.71 billion, compared to $290.12 billion a year earlier.
Last week, ConocoPhillips reported that its third-quarter profit fell 31 percent, as the company struggled against falling commodity prices globally. Exxon Mobil Corp. and Royal Dutch Shell are expected to report earnings Thursday, followed by Chevron Corp. on Friday.
Oil prices remain a key driver of industry profits, and third-quarter net income will depend partly on where a company’s production is located, analysts said. U.S. benchmark West Texas Intermediate crude has been trading at lower prices than international benchmark Brent crude.
Despite the rough stretch, a number of major oil companies, including BP, are pressing ahead with production and exploration around the world. They also are diversifying or refocusing their portfolios through asset sales and purchases.
Wall Street remained closed for a second day Tuesday as Sandy came ashore across the Northeast.