BP profit slides 34% on lower refining margins | business | Hindustan Times
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BP profit slides 34% on lower refining margins

business Updated: Oct 29, 2013 16:01 IST

British energy giant BP said on Tuesday that its net profit slid 34% in the third quarter, mainly as a result of lower refining margins.

BP, which remains weighed down by huge compensation payouts linked to the Gulf of Mexico oil spill disaster in 2010, said its profit after tax had tumbled to $3.5 billion (2.54 billion euros) in the three months to the end of September compared with the third quarter in 2012.

The group's replacement cost profit -- the current accounting figure which excludes changes in the value of oil inventories -- dropped to $3.18 billion. Production fell 2.3%, it revealed in an earnings statement.

BP added that charges incurred by the group as a result of the Gulf of Mexico oil spill disaster in 2010 currently stood at $42.5 billion.

"Compared with 2012, the third-quarter result was significantly impacted by weaker refining margins, particularly in the US, as well as the absence of earnings from the divested Texas City and Carson refineries, each of which delivered unusually strong results in the third quarter of 2012," BP said.

The group has so far agreed to sell $38 billion worth of assets to help pay for cleaning up and for compensation following the spill disaster.

On Tuesday, it added that it planned new disposals aimed at bringing in a further $10 billion by the end of 2015, although the proceeds would be used mainly to buy back shares.

"The strong operational progress we are now seeing across the group, combined with our focus on disciplined investment, also underpins our confidence in growing long-term sustainable free cash flow and being able to increase shareholder distributions," BP chief executive Bob Dudley said on Tuesday.

Despite the sizeable drop in earnings, BP shares topped London's benchmark FTSE 100 index in morning deals, rising 3.76% to 469.1 pence. The FTSE was up 0.36% overall to 6,750.31 points.

"BP has surprised to the upside. Profit has exceeded forecasts, whilst news of an increase in the dividend payment is greatly welcomed" by investors, said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

"On the downside, the Gulf of Mexico accident still overhangs, headline production has again declined, as business sales continued, whilst weaker refining margins, particularly in the US, further impacted."

BP, seeking to reposition itself amid ongoing compensation payouts, agreed last year to a massive strategic deal with the main Russian oil producer Rosneft.

The latest earnings update meanwhile comes three and a half years after a deadly explosion on a BP-leased drilling rig unleashed the worst environmental disaster in US history.

Earlier this month, a US court handed BP a boost in its fight to limit how much it must pay in compensation.

An appeals court in New Orleans ruled that payments to some companies with disputed loss claims arising from the Deepwater Horizon spill must stop, pending further study by a lower court.

The rig exploded and killed 11 workers, and spilled oil for 87 days until it was plugged. The disaster blackened beaches in five US states and crippled tourism and fishing industries.