BP's Q1 earnings slip 13% on lower output, weak downstream
London (Platts)--1May2012/629 am EDT/1029 GMT
BP reported Tuesday a 13% year-on-year fall in adjusted earnings for the
first quarter of 2012, missing market expectations, as lower production and
sharply weaker downstream earnings offset the benefit of higher oil and gas
Excluding one-time items and accounting effects, the company posted an
underlying replacement cost profit of $4.79 billion for the first quarter,
down 13% from $5.5 billion the year before.
Replacement cost profit for the quarter including items was $4.93
billion, compared with $5.61 billion a year earlier.
The adjusted result missed consensus forecasts of around $5.1 billion
due mainly to higher upstream costs and a larger-than-expected $541 million
accounting charge for intra-company sales between its upstream and downstream
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"BP's slightly weak Q1 numbers come as a disappointment following
strong performances from Shell and Eni last week," Credit Suisse said in a
note. "A weak refining and marketing result is disappointing given BP's
structural location advantages in the US Mid-Con and Gulf Coast compared to
its European peers."
BP's shares fell sharply in London after the results were announced and
the stock was trading 3.5% lower at 429.30 pence by 0930 GMT.
Outside Russia, BP said its oil and gas production for the quarter was
2.45 million barrels/day of oil equivalent, 6% lower than the first quarter
of 2011, reflecting asset sales and the impact on production in the wake of
the 2010 Gulf of Mexico oil spill.
In Russia, TNK-BP production rose 4% to 1.02 million boe/d net to BP, and
in the quarter BP received a cash dividend from TNK-BP of $690 million.
Combined, BP's output in the quarter totaled 3.47 million boe/d, 5.7%
lower than 3.49 million boe/d reported for the year-ago period.
BP began splitting out its reported volumes from the Russian venture
TNK-BP earlier this year.
Higher upstream costs and falling output combined to offset an average
realized oil price of $108.13/b in the quarter, up from $93.93/b in the
year-ago period, BP said.
"Looking ahead, we expect second-quarter reported production to be
lower, and costs to be higher, as a result of normal seasonal turnaround
activity concentrated on high-margin production in the Gulf of Mexico at
Atlantis, Mad Dog and Holstein," BP said.
BP has said it expects its reported production to be lower than the 3.45
million boe/d average in 2011, with underlying production in 2012 to be
broadly flat, excluding TNK-BP.
BP said it remains on track to start up six new major upstream projects
this year, with Clochas-Mavacola in Angola and Galapagos in the Gulf of Mexico
expected to start in the second quarter.
"We have made a good start against our strategic priorities for 2012,"
CEO Bob Dudley said in a statement. "During the quarter we gained access to
significant new deepwater and US shale exploration acreage, our ongoing
divestment program has reached $23 billion, and we have five deepwater rigs
at work in the Gulf of Mexico."
BP has already agreed to sell some $23 billion in assets to strengthen
its balance sheet as it meets the costs of the 2010 Gulf spill, but still has
more assets to shed to hit a target of raising up to $38 billion from sales
by the end of 2013.
The impact of divestments is expected to be around 120,000 boe/d in 2012
compared with 2011, BP has said, depending on the timing of the assets sales.
Downstream, BP reported a replacement cost profit of $856 million for
the quarter, down from $2.08 billion a year earlier, due to a weaker refining
margin environment and lower petrochemicals margins.
BP said the result was hit by a "significantly weaker" performance from
supply and trading, unfavorable local crude differentials in Europe, a
difficult fuels marketing environment resulting from weaker demand, and the
impact of the temporary shutdown of its Cherry Point refinery following a
fire in February.
The company said it expects refining margins to improve in line
with seasonal trends during the second quarter, with fuels marketing volumes
and petrochemicals margins to remain "subdued". The Cherry Point refinery is
expected to resume full operations in May having completed both repairs and
the scheduled second-quarter turnaround, BP said.
BP reiterated its guidance that sale of its Texas City and Carson
refineries is still expected to be completed by end 2012 and that the Whiting
refinery upgrade is expected to start up in second half of 2013.
The petrochemicals business delivered an underlying replacement cost
profit before interest and tax of $112 million in the first quarter, compared
with $519 million in the same period last year.
--Robert Perkins, firstname.lastname@example.org