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BP’s downstream boosts upstream losses

BP news
BP news

Oil major BP’s profits in the third quarter of the year have dropped by 40%.

The company, which announced its third quarter results today, said its underlying profits came in at $1.8billion compared with more than $3billion a year ago.

The lower results, BP said, were primarily due to the effect of lower oil and gas prices.

In its downstream business the operator continued to see a strong performance which saw an increase in profit from $1.5billion last year to $2.3billion.

Strong refining operation and fuels marketing and cost benefit simplification was said to have boosted the area of the business.

Income from other sources including Rosneft for the quarter have also increased from $110million in the third quarter last year to $383million.

BP said the company has almost completed its current divestment programme which is expected to approach $10billion by the end of 2015.

A further $3-5billion in divestments are expected next year, before returning back to a rate if around $2-3billion a year thereafter.

The company’s chief executive Bob Dudley is set to brief investors today on the oil major’s results.

He said staff were working hard to rebalance their books at $50 oil.

Dudley said: “Last year, we acted decisively to reset BP for a sustained period of lower oil prices and the results are coming through well. We are now in action to rebalance our financial framework in this new price environment.

“And I am confident that BP’s strong and well-balanced portfolio of businesses and projects gives us the ability to grow value into the future. All of this underpins our strong priority of sustaining our dividend and then growing free cash flow and shareholder distributions over the long term.

“BP has successfully adapted to changing circumstances many times in its history and, in a hard time for the entire industry, I believe we will once again successfully take on today’s challenges. We are already in action, with a quality portfolio and clear plans for the future, underpinned by enduring principles. I am confident BP will continue to deliver value into the years and decades ahead.”

BP’s operating cash flow for the third quarter was $5.2billion, bringing the total for the first nine months of the year to $13.3billion.

Organic capital expenditure over the nine month period was $13.2billion.

Net debt was $25.6billion, representing a gearing level of 20%, including 1% arising from the agreements in principle, BP said, to settle with the US government and Gulf states over the 2010 Deepwater Horizon oil spill.

In July the company said it had reached, in principle, an agreement to settle all outstanding federal and state claims arising from the incident.

It included payments of up to $18.7billion over a period of 18 years.

A hearing is set for March 2016 to consider final approval.

BP said it also entered into an agreement with five Gulf states and has accepted releases received from the vast majority of local government entities and payments required under those releases were made during the third quarter.

A charge of $426million for the incident was also taken in the third quarter, bringing the total pre-tax charge to $55billion.

During the quarter BP was awarded five new blocks in the UK North Sea.

In October it was announced that, subject to government approval, BP was also awarded three shallow water blocks in the Mediterranean Sea off Egypt.

The Woodside-operated Western Flank A project offshore Western Australia, the latest phase of the North West Shelf development, began production in October.

Capital expenditure from now until 2017 is expected to be between $17-19billion.

Last year, expectations for capital expenditure were $24-26billion while they were estimated at just under $20billion in the second quarter of this year.

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