BP Q1 profit slumps 12.8% after asset sales

BP CEO Bob Dudley says company has mad a good start in 2012, despite fall in profit. GETTY IMAGES

BP reported a larger than expected 12.8% drop in quarterly profit, as the company’s asset sales program blunted its ability to take advantage of high oil prices.

The supermajor has announced replacement cost net profit of $4.93 billion in Q1 2012, down from $5.61 billion in the same period last year.

Stripping out one-off items such as the profit on asset sales, the result was $4.80 billion, below an average forecast of $5.10 billion from a Reuters poll of nine analysts.

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The news comes despite a 4% cut in BP’s effective tax rate, down from 37% through Q1 2011, and higher oil prices. Brent crude prices averaged $118 per barrel last quarter, up from $105 in the same period a year before. Profit was, however, up of the final quarter of 2012. BP estimates its earnings rise $300 million a year for every $1 gain in Brent crude.

Production for the quarter was 2.452 million barrels of oil equivalent per day, some 6% lower than the first quarter of 2011, due to divestments. BP actually slightly increased production from the fields it did not sell.

BP estimates the total cost of the 2010 Gulf of Mexico disaster – which killed 11 workers and caused the worst offshore oil spill in U.S. history - will cost $37.2 billion, and has paid out $8.3 billion so far.
The company it is making good progress towards the operational milestones that it expects to meet in 2012 – advancing the development of major new projects, continuing to gain promising new exploration access, and continuing its $38 billion divestment programme. BP has made $23 billion of disposals so far.

““We have made a good start against our strategic priorities for 2012,” commented Bob Dudley, BP CEO. “During the quarter we gained access to significant new deepwater and US shale exploration acreage, our ongoing divestment programme has reached $23 billion, and we have five deepwater rigs at work in the Gulf of Mexico. This operational progress will underpin the financial momentum we expect to come through as we move into 2013 and 2014.”

BP is progressing with a proposed $7.8 billion settlement with individuals and businesses affected by the Gulf of Mexico spill, and expects to pay for the settlement out of a $20 billion trust the company set up in the aftermath of the spill to quell political pressure.
Investors reacted negatively to the news, with shares falling 2.11% to 435.6p in early trading.

BP’s shares are broadly flat over the year, but around 30% off their pre-oil spill peak.