BP results show strain of Russia, US spill

BP delivered the worst of a poor set of quarterly results among top oil companies today, slashing $5bn (£3.18bn) off the value of US assets and undershooting expectations with its operating result.

The British oil company is struggling under the weight of litigation over the 2010 US Gulf oil spill and a row with its Russian partners. Analyst Richard Griffiths of Oriel Securities said the figures were "testing the faith" of investors and on a divisional basis "missed at every level". BP shares were down 3.1 per cent at 430.7 pence at 8:30 am today.

The $5bn charge included $2.7bn for the declining value of US refineries and $2.1bn for U.=S shale gas assets which are suffering a slump in prices, and for the suspension of its Liberty project in Alaska.

The shale gas and refinery writedowns do not come as much of a surprise. Other companies have being doing the same.

But BP also took an extra $847m provision for the 2010 US Gulf oil spill - bringing the total set aside for the disaster to $38bn or well over two years worth of profits at current prices. Investors are hoping for a deal with US authorities before the US elections, but BP warned there was still "significant uncertainty" with regard to its potential obligations there.

BP had nothing new to say about its dispute with the co-owners of TNK-BP, who on Monday blocked the payment of dividends from the business.
The charge tipped BP into a loss for the quarter of $1.4bn.

Adjusted for the charge and other one-offs, profits on a replacement cost basis were $3.7bn, down from $5.7bn a year ago and below expectations of around $4.4bn.
Analysts said an unexpectedly large loss of output as a result of maintenance in the US Gulf - a problem which also hit rival Royal Dutch/Shell in the quarter - was partly to blame for the miss.

They had also underestimated the impact of a tax lag on Russian production, which affected the profits of BP's Russian joint venture, TNK-BP. Tariffs there are based on the previous quarter's profits, when oil prices were higher.

The company said it still sees a "significant uncertainty" over US oil spill obligations but that it was in "advanced talks" and on track to sell Texas City and Carson, the two US refineries it has earmarked for disposal, by the end of 2012.