Investors cheered by BP assets’ sale and relief over profits

BP shares surged yesterday after the oil giant posted a smaller than expected drop in profits and signalled a $10bn sale of assets.

A big chunk of the proceeds – due before the end of 2015 – will be distributed to shareholders, mainly in the form of buy-backs. Shares opened more than 3 per cent higher as BP also announced an improved quarterly dividend.

Its overall charge relating to the Gulf of Mexico disaster in 2010, which left 11 workers dead and sparked the worst oil spill in US history, stood at $42.5bn at the end of September, but this was little changed on three months earlier.

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The London-based company has benefited from a recent ruling by a US federal appeals court that the terms of a compensation agreement struck with BP last year should be reviewed to help stem bogus or inflated claims.

Underlying profits for the three months to September 30 were $3.7bn, a fall of 26 per cent on a year earlier but better than City forecasts for a decline of 37 per cent.

BP set aside $8bn for shareholders earlier this year as part of proceeds from the reshaping of the oil giant’s Russian business. And it previously sold assets worth $38bn to pay for the Gulf of Mexico spill.

Investec analyst Neill Morton said: “The stock market doesn’t want the oil majors to spend money. Instead, investors want their cash back. And BP has obliged, with an increase in the dividend, a new 10 billion US dollars disposal programme and flat capital expenditure in 2014.”

BP’s production for the third quarter was 2.3 per cent lower than a year earlier but after adjusting for disposals and other production sharing agreements the figure increased by 3.4 per cent.

The improvement reflects major new projects in the North Sea and Angola and the absence of seasonal weather-related problems in the Gulf of Mexico. It expects the production figure to be broadly similar in the current quarter.

Across the upstream business, underlying profits were slightly higher at $4.42bn in the quarter. The downstream refining and marketing business posted profits of $720m, a sharp fall on a year earlier but slightly better than expected.

The performance was impacted by weaker refining margins, particularly in the United States, as well as the absence of earnings from the divested Texas City and Carson refineries, each of which delivered strong results in 2012.