BP Plc, Europe’s third-largest oil company by market value, reported a 34 per cent increase in second-quarter profit while warning that increasing sanctions against Russia could “adversely impact” business.
Earnings adjusted for one-time items and inventory changes rose to $3.6 billion from $2.7 billion a year earlier, the London-based company said today in a statement.
The quarterly dividend was unchanged from the previous three months at 9.75 cents a share. While total energy production declined due to disposals, the company brought online projects with better returns, it said.
US output rose 28 per cent in the quarter from a year earlier, boosted by new assets in the Gulf of Mexico.
“We are continuing to ramp up the major new projects that drive delivery of cash flow and are also now seeing benefits from our focus on operating with greater reliability and efficiency,” chief executive officer Bob Dudley said in a statement. “This was another successful quarter, delivering both operational progress and robust cash flow.”
The shares rose 0.7 per cent to £500.40 at 8:15 in London trading, the best performer on the FTSE 350 Oil and Gas Producers Index. BP, with a 20 per cent stake in OAO Rosneft, holds the single-biggest foreign investment in Russia and stands to lose the most from further sanctions in response to the country's annexation of Crimea.
The European Union and the US may act as soon as today to tighten sanctions aimed at key sectors of the economy -- finance, defense and energy. "To date, these sanctions have had no material adverse impact on BP or Ruhr Oel GmbH," a joint refining venture between BP and Rosneft, it said. "However, BP will continue to keep this under review."
Yesterday, a Dutch court ruled in favor of former Yukos Oil Co. officials, ordering Russia to pay $50 billion for seizing what was once the country's largest oil producer. The decision risks dragging Rosneft and OAO Gazprom, the natural gas exporter, into extended legal wrangling. The state-run companies may be targeted because they were beneficiaries of expropriated Yukos assets.
“Any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation,” BP said.
Five new projects started production this year, including three in deepwater off the Gulf of Mexico and the CLOV project in Angola, which produced first oil in June. Two more projects are expected to start in 2014. The end of BP’s Abu Dhabi concession in January together with divestments meant overall production was 6 per cent lower at 2.1 million barrels of oil and gas a day. Underlying output, which reflects divestments, was 3 per cent higher. Improved margins from its newly upgraded US refinery and a stronger contribution from Rosneft also helped profits, BP said.
"These were a strong set of results,” said Anish Kapadia, an analyst at Tudor Pickering Holt and Co. in London. “It was particularly encouraging to see increased oil production from the US as well as a good contribution from Rosneft, putting them on track to meet the $30 billion to $31 billion target for cash flow for the year.”
Bloomberg
