BP profits drop

BP has reported a fall in profits in 2013, as the company feels the brunt of its divestment program. 

Underlying replacement cost profit for Q4 was US$2.8 billion, compared with $3.9 billion for Q4 2012. Full-year underlying replacement cost profit was $13.4 billion, compared with $17.1 billion in 2012.

BP said the results were affected by its $38 billion divestment program; weaker refining margins; and higher depreciation and exploration write-offs.

These issues were partially offset by strong growth in underlying oil and gas production, particularly from key regions, including the North Sea, Angola, and Gulf of Mexico.

Despite the costs, BP said 2013 was its most successful year for exploration drilling—for almost a decade.

BP took part in 17 completed exploration wells, making seven discoveries. Three of those were announced in Q4: the Gila discovery, in the Paleogene trend in the Gulf of Mexico; the pre-salt Lontra discovery, in Angola, operated by Cobalt International Energy; and the Petrobras-operated Pitu discovery in Brazil’s Equatorial Margin.

New production has also been brought on stream. Three major upstream projects started-up in 2013,  and the Chirag Oil project in Azerbaijan began production on January 28. A further five projects are expected to begin production through 2014.

In December, final investment decisions were taken on two significant upstream development projects: the Khazzan tight gas project in Oman, and the Shah Deniz 2 project in Azerbaijan, and associated pipelines.

BP announced, in October 2013, that it expects to divest a further $10 billion of assets by the end of 2015. To date, it has agreed around $1.7 billion of such further divestments.

CEO Bob Dudley said: “Capital discipline is central to BP’s strategy; making the right investment choices, sticking to our capital limits, and actively managing our portfolio in pursuit of long-term value.”

BP also updated on its costs relating to the Gulf of Mexico oil spill.

It said its cumulative pre-tax charge for the spill was $42.7 billion at the end of 2013, having increased by $0.2 billion in Q4, to reflect an increase in the provision for legal costs, and ongoing Gulf Coast Restoration Organization costs. The charge does not include any additional provision for business economic loss claims, arising from the economic loss settlement with the Plaintiffs’ Steering Committee (PSC) that are yet to be received, processed, and paid.

The cumulative amount estimated to be paid from the Trust Fund remained at $19.3 billion, leaving around $700 million unallocated headroom available in the Trust for further expenditures.

The District Court has yet to rule on the first two phases of the MDL 2179 trial, which completed during 2013, and the Court could issue its decision at any time. The Court has not yet scheduled the penalty phase, in which it will hear evidence regarding the factors to be applied in assessing a penalty under the Clean Water Act.

An appeal by BP remains outstanding in relation to the economic loss settlement with the PSC. BP is attempting to prevent awards to claimants whose losses are not traceable to the spill.