BP still paying the price for US oil spill

Europe’s second-largest oil company by market value said yesterday output would continue to decline in the second quarter, helping send its shares down.

The shares are down nearly nine per cent so far this year, against a near two per cent average drop among its industry peers. Analysts at Citigroup said they had doubts about BP’s ability to increase output, keep a lid on costs and maintain its interest in key assets where it has had disputes with partners.

The financial headwinds also mean BP will struggle to raise its dividend to the level it was at before the spill, when it was slashed, analysts at brokerage Bernstein said in a note.

BP unveiled plans to sell a number of mature fields in the Gulf but a spokesman denied the company was making a more general pullback from the region, saying the disposals reflected a new strategy of churning assets more quickly and focusing on larger, younger projects.

The London-based group added it would have to spend more than earlier expected to clean up America’s worst-ever offshore oil spill, although this was offset by a drop in the expected cost of paying out claims after the company agreed a settlement with impacted individuals and businesses.

BP said its replacement cost (RC) net profit fell to $4.93bn in the first quarter, compared with $5.61bn in the same period last year.

The drop was also driven by weaker refining results.

Stripping out one-off items such as the profit on asset sales, the result was down 13 per cent to $4.80bn, below an average forecast of $5.10bn from a poll of nine analysts.

“There is little in the numbers for the bulls,” analysts at Nomura said in a note to clients.

BP said oil and gas production, excluding its Russian joint venture TNK-BP, was down 6 per cent at 2.45 million barrels of oil equivalent per day (boepd).

Citigroup said production costs had also risen, due to measures BP has taken to address safety concerns following the Gulf of Mexico blowout.

Further output drops are seen in the second quarter, while the sale of the Gulf of Mexico fields on the block, which include Holstein and Marlin, will cut another 50,000 boepd.

BP is a major employer in East Yorkshire through its acetyls plant at Saltend, near Hull.