Tags: bp | spending | oil price | profit

BP Cuts Spending as Fourth-Quarter Profit Falls on Lower Oil

Tuesday, 03 February 2015 01:58 PM

BP Plc reported better-than-forecast fourth-quarter profit even as oil prices slumped, forcing Europe’s third-largest oil company to cut spending.

Profit adjusted for one-time items and inventory changes dropped to $2.2 billion from $2.8 billion a year earlier, the London-based company said in a statement. That beat the $1.6 billion average forecast of 13 analysts surveyed by Bloomberg. The results were bolstered by income from BP’s 20 percent holding in Russia’s state-run oil producer OAO Rosneft.

A slump in oil prices to less than $50 a barrel from more than $100 seven months ago has forced producers to review projects, slash spending and sell assets as they try to safeguard returns to investors. BP Chief Executive Officer Bob Dudley told staff last week their pay will be frozen this year, while the company cut jobs in the North Sea, Azerbaijan and Trinidad and Tobago.

“The prudent way to manage the company is planning on one, two, three years” of low oil prices, Dudley said in an interview on Bloomberg TV. “Every time the price of oil drops, the cost structure also drops, so we may still be able to sustain a dividend for a long time even at low prices.’”

BP shares rose 2.8 percent to 449.85 pence at the close in London trading. That’s the highest price since Oct. 1.

Even so, the producer reported a $4.4 billion net loss in the quarter after writing down the value of oil and gas fields because of lower oil prices.

Spending Cut

BP expects to cut spending to $20 billion this year, compared with previous guidance of $24 billion to $26 billion. It spent about $23 billion in 2014. Some upstream projects such as Mad Dog in the Gulf of Mexico may be deferred, and chemical capacity in the U.S. and Asia may be closed, BP said.

“BP’s results were more resilient than expected,” Kim Fustier, an analyst at Edison Investment Research, said in a note. Its 20 percent capital expenditure cut in 2015 from previous guidance highlights the company’s greater flexibility compared with peers, she said.

BP had a contribution of $470 million from its shareholding in Rosneft, Russia’s largest oil producer. That compares with $1 billion a year ago and was higher than analysts had expected.

BP’s CEO, who’s been in the role since 2010, expects Rosneft to pay out its annual dividend this year.

Dudley was cautious on prospects for a rebound in the oil price. It could be three years before oil comes out of a $40 to $60 price range and a “long time” before oil returns to $100 a barrel, he said.

Gulf of Mexico

The company is trying to shore up its balance sheet with asset sales after the Gulf of Mexico oil spill in 2010 that led to a $43 billion provision to cover costs. Last month, a judge ruled that less oil was spilled than the U.S. government estimated. The third phase of the trial, which determines how much BP must pay, began almost two weeks ago.

The company has sold more than $4 billion of assets in a $10 billion sale program planned for 2014 and 2015.

Overall production that includes Russia was 3.214 million barrels of oil equivalent a day compared with 3.231 million barrels for the last quarter in 2013.

BG Group Plc, the U.K.’s third-largest oil and gas company, posted a net loss of $5.03 billion today after reporting impairments of its Australian gas assets.

Royal Dutch Shell Plc, Europe’s largest oil company, last week said fourth-quarter adjusted profit rose to $3.3 billion from $2.9 billion and the company cut its budget by $15 billion over the next three years.

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BP Plc reported better-than-forecast fourth-quarter profit even as oil prices slumped, forcing Europe's third-largest oil company to cut spending.
bp, spending, oil price, profit
Tuesday, 03 February 2015 01:58 PM
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