Refining business hits BP profit

HOUSTON — Third-quarter profit for BP fell by a third compared with the same period a year ago, as earnings for its refining arm dropped sharply, the company announced Tuesday.

The British oil giant reported a profit of $3.6 billion for the three-month period ending in September, down from $5.3 billion in the same period a year ago. Still, it had revenue of about $97 billion, up from $92 billion in the third quarter of 2012.

Profit for BP’s downstream division, which includes its refining and petrochemicals businesses, was $1 billion, down from $3.3 billion a year ago.

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BP said its U.S. downstream division lost $22 million in the quarter, a steep decline from a $1.7-billion profit a year earlier. Earlier this year, BP sold its Texas City refinery, which had a capacity of 475,000 barrels per day, for about $2.4 billion.

The company said it faced lower earnings in its refining business, in part because high gasoline stocks have caused refining margins to narrow.

Asset sales

In a move aimed at pleasing investors, BP said it plans to sell $10 billion in assets before the end of 2015, with the majority of the proceeds expected to be used for buying back shares or paying dividends. The company also said it will increase its quarterly dividend by 5.6 percent, to 9.5 cents a share payable in December.

BP has sold $38 billion in assets over the last three years.


In a conference call with analysts Tuesday morning, BP CEO Bob Dudley said that the company is focused on new exploration and production, with several milestones reached this year.

BP plans to complete drilling on up to 18 exploratory wells this year. So far, it has drilled 12 wells and has eight other wells underway, Dudley said.

The company had major discoveries in Egypt and India during the quarter and has returned to high levels of activity in the Gulf of Mexico, Dudley said.

“The life blood of an oil and gas company is finding oil and gas and you’ve seen us rejuvenate that,” he said.

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BP’s latest discovery in India was made nearly 20,000 feet below sea level and was a result of the company’s exploration skills, Dudley said.

“This new play has been identified using the detailed geoscience expertise that we can bring to bear on our portfolio,” he said.

The company is investing $100 million in supercomputers and analysis tools to help it quickly find and identify new resources. It opened a center in Houston this month aimed at supporting the exploration goals.


New wells currently producing have added 124,000 barrels of oil equivalent per day from Angola and 148,000 barrels per day from Norway, Dudley said.

The company now has eight rigs drilling in the Gulf of Mexico.

“That’s the highest number of rigs engaged in drilling operations in the Gulf since 2010,” Dudley said.

BP reported production of 3.17 million barrels of oil equivalent per day during the quarter. Excluding its holdings in production from Russia’s Rosneft, the company produced about 2.2 million barrels of oil equivalent per day, with strong output from additions in Norway and Angola that began producing in 2012, the company said.

In the third quarter, BP began production from its $5 billion North Rankin 2 project in Australia.

Legal issues

BP remains hampered by ongoing litigation related to the 2010 oil spill from its Macondo well in the Gulf of Mexico.

So far, the disaster has cost BP $42.5 billion, BP Chief Financial Officer Brian Gilvary said. As part of those costs, BP has paid out $19.3 billion from a $20 billion fund it set aside to compensate those affected by the disaster.

BP has disputed several claims made by businesses and individuals. Although the company agreed in 2012 to a $7.8-billion settlement to pay off those claims from its $20 billion fund, it has argued that hundreds of millions of dollars in claims are suspect. Gilvary said that BP is disputing 90 percent of about $1 billion in claims, and that the company would review other claims already paid out if a judge agrees that there were fraudulent claims.

“Then we’ll go back and look at what claims have been paid out and to the degree at which we believe they were unreasonable,” Gilvary said.

Dudley said BP has made an effort to ensure that ongoing legal proceedings related to the spill do not affect its employees and their focus on growth.

“We are well prepared for the long haul on legal matters and continue to compartmentalize the running of these activities,” he said.