Oil giant BP sees fall in profits to £2.95bn

Oil giant BP revealed a dip in profits today as its commitment to sell off billions of pounds of assets in the wake of the Gulf of Mexico disaster hit production.

The group reported underlying replacement cost profits of 4.8 billion US dollars (£2.95 billion) in the first quarter, compared with 4.98 billion US dollars (£3.06 billion) in the previous quarter and expectations of 5 billion US dollars (£3.07 billion).

The group reported a 6% decline in oil and gas production to 2.45 million barrels of oil a day as its programme of asset disposals since 2010 hit 23 billion US dollars (£14.2 billion). BP sold businesses in the US, Canada and the North Sea in the period.

BP said the total charge taken to cover the impact of the fatal Deepwater Horizon explosion in April 2010 remained at 37.2 billion US dollars (£22.9 billion) in the period.

Shares in BP fell nearly 3% after today's update.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "For BP, the Gulf of Mexico accident continues to overhang, with asset sales impacting production.

"On the upside, planned asset sales are 60% complete, new exploration projects continue to be pursued, while the costs, at least for now, for the Macondo accident are reducing."

BP said it is making good progress towards the "operational milestones" that it expects to meet this year, including moves towards its pledge to sell 38 billion US dollars of assets.

BP completed the sale of gas assets in Kansas, Canadian natural gas liquids business and its Southern North Sea gas assets in the period.

The group is now looking to sell "non-strategic" assets in the Gulf of Mexico, including the Marlin, Horn Mountain, Holstein, Ram Powell and Diana Hoover fields.

BP entered into concessions with oil firm Petrobras in Brazil in the period, as well as deepening its interests in offshore Namibia and being awarded three new blocks offshore Uruguay.

BP said it remains on track to start up six new major upstream projects in 2012, with Clochas-Mavacola in Angola and Galapagos in the Gulf of Mexico expected to start in the second quarter.

Underlying replacement cost profit in the upstream business improved compared to the previous quarter, helped by higher oil prices and lower costs.

All three downstream businesses - fuels, lubricants and petrochemicals - delivered higher underlying replacement cost profits than in the previous quarter, BP said.

BP made payments of 1.5 billion US dollars (£924 million) to the 20 billion US dollar (£12.3 billion) trust in the period, set up to cover the costs of claims for the Gulf of Mexico oil disaster.

The oil giant's payments into the trust total 16.6 billion US dollars (£10.2 billion) and it expects its payments to end in the fourth quarter of this year, a year earlier than initially anticipated.

BP also covered a total of 8.3 billion US dollars (£5.1 billion) in individual, business and government claims, advances and other payments at the end of the quarter.

And it recently announced it had, subject to court approval, reached definitive agreements with the Plaintiffs' Steering Committee to resolve the majority of private economic loss and medical claims, which is expected to be around 7.8 billion US dollars (£4.8 billion).

PA