BP suffers big drop in earnings

BP Chief Executive Bob Dudley, pictured here on February 21, 2011, has made safety a top priority.

Story highlights

  • BP's quarterly earnings fell 35 per cent
  • It reported adjusted profit of $3.7bn, compared with $5.7bn a year ago
  • The drop shows BP is still struggling to adjust two years after the Deepwater Horizon disaster
  • BP said the results reflected "extensive planned maintenance"

BP's quarterly earnings fell 35 per cent on weaker oil and US natural gas prices and falling production.

The UK oil group reported adjusted profit of $3.7bn, compared with $5.7bn a year ago. The steep drop shows BP is still struggling to adjust more than two years after the Deepwater Horizon disaster in the Gulf of Mexico.

Since taking the reins at BP in October 2010, chief executive Bob Dudley has made safety a top priority, significantly boosting BP's maintenance programme. The latest results show that taking some of the company's biggest oilfields out of commission for safety checks and turnrounds has hurt production and profits.

BP said the results reflected "extensive planned maintenance", which particularly impacted its highly profitable production in the US Gulf of Mexico, as well as lower net income from its Russian joint venture TNK-BP.

2010: Can Kevin Costner save the Gulf?
2010: Can Kevin Costner save the Gulf?

    JUST WATCHED

    2010: Can Kevin Costner save the Gulf?

MUST WATCH

2010: Can Kevin Costner save the Gulf? 03:21
PLAY VIDEO
TNK-BP shareholder dispute deepening
TNK-BP shareholder dispute deepening

    JUST WATCHED

    TNK-BP shareholder dispute deepening

MUST WATCH

TNK-BP shareholder dispute deepening 03:51
PLAY VIDEO
2010: First 100 days of BP oil disaster
2010: First 100 days of BP oil disaster

    JUST WATCHED

    2010: First 100 days of BP oil disaster

MUST WATCH

2010: First 100 days of BP oil disaster 06:20
PLAY VIDEO
Louisiana shrimper talks BP settlement
Louisiana shrimper talks BP settlement

    JUST WATCHED

    Louisiana shrimper talks BP settlement

MUST WATCH

Louisiana shrimper talks BP settlement 02:32
PLAY VIDEO

Mr Dudley said the "weak" earnings were driven by a "combination of factors affecting the sector and BP specifically". He cited the effects of movements in the price of oil and gas, as well as BP's "extensive turnround and maintenance programme" which was designed to "enhance safety and reliability for the long term".

All the oil supermajors' quarterly earnings have reflected the drop in US natural gas prices, which fell to 10-year lows earlier this year because of a glut in supply brought on by the shale gas boom. Results for both Royal Dutch Shell and ExxonMobil were well below analysts' expectations.

BP followed BG Group in writing down the value of its US shale gas assets. It said impairments totalled $4.8bn, though these included certain refineries in its portfolio and the decision to suspend a big oil project in Alaska.

BP's production was 2.28m barrels a day, excluding TNK-BP -- slightly down on last year. The company said production in the third quarter would be slightly lower again, due to maintenance, though production for the year would be broadly flat.

Mr Dudley insisted earnings momentum would build into 2013 as BP completed payments into the trust fund to compensate victims of the Gulf of Mexico spill, and as high-value production came back on line and new projects started up.

One significant drag on profits was TNK-BP, where net income was $700m lower than a year go. BP said this was due to the lag in Russian oil export duty, which was based on earlier higher oil prices.

BP announced in June that it was pursuing a sale of its 50 per cent stake in TNK-BP, a joint venture, with a group of billionaire oligarchs which has been hugely lucrative but plagued by a sequence of bruising corporate battles.

The company is in negotiations with both AAR, the consortium that owns the other half of TNK-BP, and Rosneft, Russia's state oil company.

      CNN recommends

    • pkg clancy north korea nuclear dreams_00002004.jpg

      North Korea nuclear dream video

      As "We are the World" plays, a video shows what looks like a nuclear attack on the U.S. Jim Clancy reports on a bizarre video from North Korea.
    • Photos: Faces of the world

      Photojournalist Alison Wright travelled the world to capture its many faces in her latest book, "Face to Face: Portraits of the Human Spirit."
    • pkg rivers uk football match fixing_00005026.jpg

      How to fix a soccer match

      Europol claims 380 soccer matches, including top level ones, were fixed - as the scandal widens, CNN's Dan Rivers looks at how it's done.
    • No Eiffel Towers, Statues of Liberties, Mt. Rushmores, Taj Mahals, Aussie koalas or Chairman Maos.

      15 biggest souvenir-buying no-no's

      It's an essential part of any trip, an activity we all take part in. Yet almost none of us are any good at it. Souvenir buying is too often an obligatory slog.