BP: Earnings Still Haunted by Gulf of Mexico Spill
BP (NYSE:BP) appears to be shrinking. The British oil and gas producer reported earnings on Tuesday that were one-fifth the amount of those posted in the year-ago quarter. But excluding one-time taxes related to its recent asset divestments and liability payments, the company beat analysts’ expectations.
Profit dropped 72 percent in the three-month period, as its oil and gas production continued to fall. Analysts say this performance showed that the company is still working to recover from the Gulf of Mexico oil spill, according to the Wall Street Journal. That event, which was the worst oil spill in American history, has cost BP more than $42.2 billion since the Deepwater Horizon drilling rig exploded in 2010.
But the spill will haunt BP into the next quarter. On February 25, the trial to determine the company’s civic liabilities will begin, and with it, BP will face the possibility of billions of dollars more in penalties.
However, Chief Executive Officer Bob Dudley said that in 2012 the company set a strong base for future growth by selling assets and beginning several new drilling operations. “We will continue to see the impact of this reshaping work in our reporting results in 2013,” he said in the earnings release. “By 2014, I expect the underlying financial momentum to be strongly evident.”
The company began five major new oil and gas projects last year, and it is expected to start production in Angola, Australia, the Gulf of Mexico, and Azerbaijan this year. But despite the new operations begun in 2012, the company’s oil and gas production still decreased 7 percent to 2.29 million barrels of oil equivalent per day in 2012, and its output is projected to continue falling this year as well.
While profits came in above expectations, BP’s operating performance did not. “It’s all a bit messy because it’s beaten at the bottom line, but the operational results are quite mixed, with upstream not looking that impressive,” Investec analyst Stuart Joyner told the WSJ.
BP’s replacement cost profit, a figure equivalent to net profit, fell to $2.14 billion in the three months ended December 31 from $7.61 billion in the year-ago quarter. Profit was hit by a $4.13 billion charge, which included $3.85 billion from the company’s settlement of federal criminal charges. Sales of its oil and gas production assets, worth $3.31 billion, partially offset the penalty.