LONDON – BP’s second-quarter earnings fell 45 per cent as lower oil prices hit the British energy company.
Underlying replacement cost profit, which excludes one-time items and fluctuations in the value of inventories, fell to $720 million from $1.3 billion in the same quarter a year earlier, the company said in a statement released Tuesday. BP’s net loss narrowed to $1.4 billion from $5.8 billion.
BP took a pre-tax charge of $5.2 billion in the quarter for costs related to the Deepwater Horizon disaster in 2010. The company sought to draw a line under the incident earlier this month, saying it estimated the final pre-tax cost of the spill — including fines, litigation and environmental costs — at $61.6 billion. The statement marked an important milestone for BP as it tries to persuade investors that the years of retrenchment have ended and it is ready to grow — despite oil prices hovering below $50 a barrel.
“The sigh of relief emanating from BP HQ is almost palpable as the Gulf of Mexico spill is finally consigned to the history books,” said Richard Hunter, head of research at Wilson King Investment Management. “This is not to say that the challenges are over, not least of which is an underlying oil price still markedly short of the level which would provide comfort for the company.”
Oil companies have rushed to cut costs and curtail investment after oil prices fell to a 12-year low in January. Brent crude, the benchmark for international oil, averaged $46 a barrel in the second quarter, down from $62 a barrel a year earlier, according to BP. The price rebounded from the first quarter when Brent crude averaged $34 a barrel.
But BP now wants to look ahead. Bernard Looney, BP’s new chief of exploration and production, told investors recently that the company planned to deliver new production of 800,000 barrels of oil equivalent a day by 2020, which includes 500,000 barrels by the end of 2017.
“As we look forward we expect the external environment to remain challenging, but we have a strong pipeline of new projects,” chief executive Bob Dudley said.