BP's first-quarter profit drops with output


BP's first-quarter profit drops with output


LONDON (Bloomberg) -- BP Plc said profit fell because of lower output and a drop in earnings at refineries.

Earnings adjusted for one-time items and inventory changes fell to $3.2 bn in the first quarter from $4.2 bn a year earlier, the London-based company said today in a statement. That was in line with the $3.2 bn average estimate of 10 analysts in a Bloomberg News survey. The stock rose after the company raised the quarterly dividend 8.3% to 9.75 cents a share.

“This is a very solid start to 2014,” CEO Bob Dudley said in the statement. “Operating cash flow was strong in the first quarter, we have seen further exploration success and upstream project startups.”

Dudley, trying to rebuild BP’s balance sheet after the 2010 Gulf of Mexico spill while increasing returns to shareholders, has sold more than $38 bn in assets in the past few years and plans to divest another $10 bn by the end of 2015. BP expects to distribute proceeds from disposals to investors, with a bias toward buy backs, it said today.

“The dividend increase was surprising as they’ve done it earlier than expected, so that’s positive,” Iain Reid, an analyst at BMO Capital Markets in London, said by phone.

The shares advanced as much as 1.3% to 494.75 pence in London and traded at 493.2 pence at 8:24 a.m. local time.

Underlying production outside Russia was slightly lower than a year ago because of maintenance work in Angola, the company said today. Reported production was 8.5% less than the first quarter last year due to divestments and the expiry of a concession in Abu Dhabi. It expects production to fall in the second quarter due to seasonal maintenance in the North Sea and Gulf of Mexico, it said.

Declining margins from processing crude into fuels also squeezed profits, as refiners in Europe contend with falling demand and overcapacity. BP’s earnings from the business dropped to $1 bn from $1.6 bn a year earlier.

The company has sold assets worth about $3 bn on its way to the $10 bn target, it said today. Last week, it agreed to sell stakes in four oil fields in Alaska, while continuing to develop and produce from the giant Prudhoe Bay. BP will halt operations at its Australian refinery next year and will form a separate business to manage onshore oil and gas assets in the U.S. It’s taken a $521 million writedown on its Utica shale project in the U.S., it said today.

BP acquired 20% of Russia’s OAO Rosneft last year as part of an exchange for its half of Russia’s third-largest oil company. Rosneft, run by Russian President Vladimir Putin’s close associate Igor Sechin, became the largest publicly traded crude oil producer after the deal, pumping about 5% of world output.

BP said it’s too early to assess the impact of U.S. sanctions on Sechin imposed yesterday.

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