BP has failed to reduce debt in the second quarter, lagging behind competitors whose results showed they have adjusted to $50-a-barrel oil.
Chief executive Bob Dudley is still struggling to cover dividend and spending commitments with cash flow because of continuing payments for the 2010 Gulf of Mexico oil spill. Net debt rose to $39.8bn (£30bn) at the end of June from $30.9bn a year earlier.
Several of Europe’s biggest oil companies have signalled a return to growth with earnings that exceeded analyst expectations. Royal Dutch Shell generated almost as much cash from operations in the second quarter as it did when crude was above $100. Still, many producers are relying on asset sales and scrip dividends – payouts in stock – to free up funds. At BP, income still doesn’t cover spending, maintaining the pressure on its shares.
BP’s stock has dropped 13 per cent this year, the worst performer among the world’s five biggest non-state oil companies.
Gearing, or net debt to capital, climbed to 28.8 per cent in the second quarter from 24.7 per cent a year earlier, BP said on Tuesday in a statement. Adjusted net income totalled $684m compared with $720m, beating the average analyst estimate of $518.4m. A $753m exploration write-off, already flagged in June, weighed on the result.
Europe’s third-biggest oil company generated $4.9bn in cash from operations, up from $3.88bn a year earlier.
“Cash flow was strong in the first half – organic cash flow exceeded organic capital expenditure and dividends paid,” chief financial officer Brian Gilvary said. “While net debt rose primarily due to Gulf of Mexico payments, we expect this will improve over the second half as these payments decline and divestment proceeds come in towards the end of the year.”
BP estimates it will pay $4.5bn to $5.5bn for the Gulf of Mexico accident this year. Of that, it paid $4.2bn in the first half. The company has said asset sales will cover the cost of the penalties.
Profit in the upstream, or exploration and production business, totalled $710m, up from $29m a year earlier. The downstream division, which includes refining, marketing and trading, posted income of $1.41bn, down from $1.51bn a year earlier.
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