BP quarterly profit falls as divestments impact income

HOUSTON – BP’s profit fell 30 percent in the fourth quarter as it felt the impact of its multibillion-dollar divestment program and weakened refining income, the company reported Tuesday.

The British oil giant banked a profit of $1.04 billion, or $5.57 per share, in the October-December period, compared to $1.5 billion, or $7.80 per share, in the same period the year before. The lower margin was partly the result of exploration write-offs as it fired-up new projects and put more money behind exploration activities.

“We had a very good year for exploration, in fact, our best in 10 years,” BP CEO Bob Dudley said in a conference call with investors Tuesday.

BP collected $93.7 billion in revenue in the fourth quarter of 2013, down slightly from $93.9 billion in the same period the year before. The legal fallout and cleanup costs of the worst oil spill in U.S. history has propelled BP to sell off $38 billion in assets since 2011, and the company’s profits fell as it cut sources of income.

“We are now a smaller, more focused company,” Dudley said. “The divestment have removed complexity, strengthened balance sheet and left us with more distinctive set of assets.”

Oil and gas production

BP’s reported oil and gas output was 2.25 million barrels of oil equivalent per day, down 1.9 percent from the same period in 2012. Its oil-production earnings sank to $3.9 billion in the fourth quarter from $4.4 billion in the same year-ago period, a result of large divestments and higher depreciation.

Still, adjusting for $17 billion in divestments last year, the company’s offshore oil and gas output climbed in the Gulf of Mexico, the North Sea near Norway and off the coast of West Africa. The company also saw higher earnings from its stake in the Russian state-owned oil giant Rosneft.

BP’s stake in Rosneft pulled in $1.1 billion in net income in the fourth quarter of 2013, up from about $200 million in the same period the year before. The London-based oil company’s share in Rosneft’s oil and gas production was 985,000 barrels of oil equivalent per day.

Its output could sink in the first quarter this year because of further divestments, and expiring production rights for onshore assets in Abu Dhabi could shrink BP’s production by 140,000 barrels per day this year, said BP Chief Financial Officer Brian Gilvary during the conference call.

Downstream unit

Its downstream unit, including its fuels business, saw earnings sink to $70 million in the fourth quarter, down from $1.4 billion in the same period in 2012 as weaker refining margins hit its U.S. operations. It also lost income after it sold two refineries in Texas last year.

BP’s petrochemical business saw $40 million earnings in the fourth quarter, flat from the year before – mostly because of an oversupply in the U.S. and Asia, Gilvary said.

Legal troubles: BP digs in as last leg of Gulf oil spill trial approaches

BP completed its divestment program of $38 billion in assets last year. In October, BP announced plans to sell another $10 billion in assets over the next two years. The company reported that it has already divested $1.7 billion and plans to use proceeds from such sales to boost its distributions to shareholders, most often in the form of share buybacks. BP distributed $5.4 billion in cash to shareholders and bought back $5.5 billion shares.

The company said it would reveal more details on its plans on March 4 during an investor presentation. Givary said it plans to keep its 2014 capital spending about level with last year, around $24 billion to $25 billion.

“What you can see now is a company that has a more focused on a stronger portfolio, leading position in exploration, deepwater and giant fields and downstream business,” Dudley said. ” We will continue to play to these strengths.”

Exploration success

BP doubled its profit for the year at $23.5 billion and saw its most successful year in exploration drilling in nearly a decade, it said. BP announced three discoveries in the fourth quarter, one in the Gulf of Mexico, another off the coast of West Africa and a third near Brazil.

BP saw 17 exploration wells completed around the world in 2013 and expects between 15 and 20 for 2014, Dudley said.

BP also increased the amount set aside for legal and cleanup costs associated with the 2010 Gulf of Mexico oil spill, up $200 million to $42.7 billion by the end of the year. Its bill for the whole year was $1.4 billion.

BP is still waiting for a federal judge to rule on several central questions in a civil trial over the 2010 Gulf of Mexico oil spill, such as the allocation of fault among BP and its partners in the Macondo well and how much oil spilled into the ocean. A penalty phase in New Orleans to review evidence for penalties under the Clean Water Act has yet to be scheduled.

BP shares rose 20 cents to $46.31 in early trading Tuesday on the New York Stock Exchange.

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