BP PLC (BP) third-quarter net profit plunged by two-thirds Tuesday as it took a further $7.66 billion pre-tax charge for the Gulf of Mexico oil spill, although the company beat analysts' expectations on some key operational benchmarks.
BP PLC (BP) third-quarter net profit plunged by two-thirds Tuesday as it
took a further $7.66 billion pre-tax charge for the Gulf of Mexico oil spill,
although the company beat analysts' expectations on some key operational
benchmarks.
The performance shows how the spill continues to drag BP down relative to its
peers, many of whom greatly increased third-quarter profits year on year.
The U.K.-based energy giant said net profit for the three months ended Sept. 30
totaled $1.79 billion, compared with $5.34 billion for the third quarter of 2009.
The additional charge stemmed from extra costs arising from a month-long delay
in completing the costly relief well that finally sealed the blown-out Macondo
well in September, BP said. It brings BP's total provisions for the spill to
$39.9 billion.
BP says it believes its partners in Macondo, Mitsui & Co. Ltd. (MITSY) and
Anadarko Corp. (APC), are liable for $4.28 billion of this cost. Mitsui and
Anadarko deny they have any liability for the spill and have paid nothing, but
BP has billed them and will charge them interest on the unpaid sum, Chief
Financial Officer Byron Grote said.
Last week's Presidential Commission report, which questioned the integrity of
the Macondo cement job performed by Halliburton Co. (HAL), increases the chance
that BP could claim back some of the costs incurred, analysts at Bernstein
Research said.
BP struck a confident note for the year ahead. "These results demonstrate
that BP is well on track for recovery," said Chief Executive Bob Dudley. "This
strong operating performance shows the determination of everyone at BP to move
the company forward and rebuild confidence."
"Given the strength of our underlying cash flows and the investment
opportunities available to us, our 2011 capital expenditure...is expected to
exceed the $18 billion previously indicated," the company said.
The improvement in BP's financial position is also encouraging with respect to
its quarterly dividend, which was suspended in June and will be reviewed in
February, Grote said.
The decision as to whether to resume the dividend will be made purely on
financial, not political, considerations, said
Dudley
. BP
suspended the dividend amid immense pressure from the Obama administration and
Democratic legislators this summer.
Dudley
said he hoped politicians and the American people
will come to appreciate more the scale and effectiveness of BP's response to
the spill, but declined to say whether an expected shift in power to the
Republicans in Tuesday's mid-term elections would improve BP's position.
The costs of the oil spill in the quarter were greater than anticipated, but
BP's underlying performance was strong, reflecting higher oil prices and
greater profitability in refining and marketing, said Panmure Gordon analyst
Peter Hitchens.
The company said its clean replacement cost profit, a closely-watched figure
which strips out charges related to the spill, as well as the effects of
oil-price swings, rose 18.3% for the period to $5.53 billion, compared with
$4.67 billion for the third quarter of 2009.
The result was well above expectations of $4.60 billion in a Dow Jones
Newswires poll of 12 analysts, although the increase in year-on-year profits
lagged rivals. For example, Royal Dutch Shell PLC's (RDSB.LN) quarterly profits
rose 88% compared with the 2009 quarter.
A big part of BP's relatively weaker underlying performance was a 4% decline in
total oil and gas production to 3.763 million barrels a day, which was due to
maintenance shutdowns and the effect of the
Gulf of Mexico
oil
spill.
At 1423 GMT BP shares were up 1.7%, or 7 pence, at 431p.
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