HOUSTON – BP’s profits jumped 65 percent in the second quarter on a surge in Rosneft earnings, even as its global oil production and refining businesses declined, the company reported Tuesday.
The London oil firm cleared a profit of $3.37 billion, or 18 cents a share, in the second quarter, compared to $2.04 billion, or 11 cents a share, in the April-June period last year. Revenues dipped less than 1 percent to $93.96 billion.
The takehome from its stake in Russia’s state-owned oil company Rosneft nearly quadrupled to more than $1 billion in the second quarter, though BP CEO Bob Dudley told investors Tuesday the company is closely monitoring the region.
“In Russia, recent geopolitical events have continued to create levels of uncertainty,” Dudley said. “At the business level, Rosneft had a good quarter.”
But BP also said further international sanctions on Rosneft or Russia, it could hamper its relationship with Rosneft and its 19.75 percent stake in the Russian oil giant, as well as its financial position and operations.
Earlier this month, the United States imposed sanctions on Rosneft and several other Russian companies, targeting their ability to borrow western capital as international tension increases over Moscow’s aggression in Ukraine. Shares plunged after the sanctions were announced, but analysts said they probably won’t hurt BP’s earnings from Rosneft.
On Tuesday, European Union officials said they will impose more sanctions on Russia in an effort to block some economic activity, including restricting sales of technology that can be used to extract oil from unconventional reservoirs, the Wall Street Journal reports.
BP did not immediately respond to a request for comment.
The company’s oil and gas production profits fell 8 percent to $4 billion, and its refining earnings declined 8.1 percent to $933 million in the second quarter. Still, more lucrative production regions have seen increases in output and its Whiting refinery has ramped up its output, said Brian Gilvary, BP’s chief financial officer, in a conference call with investors.
BP’s Whiting refinery saw its heavy crude throughput reach a new high in production at 270,000 barrels per day in the second quarter. With new wells coming online, its Gulf of Mexico operations boosted output 3 percent compared to last year.
Earnings were also hit by a weak refining sector and by the impact of its asset divestments. So far this year, BP has made $3.4 billion in asset sales and divestments, part of its goal to divest $10 billion in assets by the end of next year. It sold off oil fields in Alaska, a handful of leases in the Gulf of Mexico and natural gas land in the Texas Panhandle this year.
Overall, its oil and gas production slipped 6 percent to 2.1 million barrels of oil equivalent per day. BP also took a $260 million hit to its upstream profits as it faced rising legal costs in connection to the Gulf of Mexico oil spill, which now total $43 billion.
A federal judge, Dudley said, has yet to rule on questions that came out of the first and second phases of the Gulf of Mexico civil trial, though a penalty phase is scheduled for January.
During the penalty phase, U.S. District Judge Carl Barbier is set to hear testimony about how much in fines BP should have to pay under the Clean Water Act. Under government estimates of the 2010 oil spill, that could be as much as $18 billion.
BP filed a motion to allow it to seek restitution from oil spill claimants “who were overpaid” as a result of an overturned accounting policy that governed how some business-loss claimants were paid.
A trial for a separate class action securities suit against BP is set for next May. BP, Dudley said, believes all the class-action claims are meritless.
Dudley said BP is making progress separating its U.S. lower-48 shale business from its other segments.
“We’ve already made a start on defining an operating model for the new business and are busy transitioning to a new streamlined organizational structure,” he said, adding that BP has also signed a lease for new office in Houston.
BP shares dipped 95 cents in early trading Tuesday to $49.69 on the New York Stock Exchange.
Article and image sourced from fuelfix.com July 30th, 2014.