BP reports an underlying replacement cost profit for the quarter is $1.3 billion, compared with $2.6 billion for the previous quarter and $3.6 billion for the second quarter in 2014.The result reflects the impact of continued low oil and gas prices.
Unrest in the Middle East has also had an impact on BP’s loss. BP reports exploration and other costs totaling $598 million in Libya, including a $432 million write-off because the stop and start of drilling operations are uncertain.
BP announced on July 2 that it had reached agreements to settle all outstanding federal and state claims and claims made by more than 400 local government entities arising from the 2010 Deepwater Horizon oil spill, an additional non-operating pre-tax charge of $9.8 billion was included in the result for the second quarter. As a result of this charge, together with other non-operating items and fair value accounting effects, BP reported a replacement cost loss for the quarter of $6.3 billion.
The BP disaster in 2014 killed 11 workers and spilled millions of gallons of crude oil into the GOM.
“The external environment remains challenging, but BP moved quickly in response and we continue to do so. Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the Group and we continue with capital discipline and divestments,” said Bob Dudley, BP’s group chief executive.
BP, along with the rest of the world’s oil business, continues to struggle with plummeting oil prices. Brent crude price averaged $62 a barrel, compared with $54 a barrel in the first quarter and $110 a barrel in 2Q 2014.
“In the past few weeks oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future,” said Dudley.
At the end of the quarter, BP’s net debt was $24.8 billion, $293 million lower than at the end of the first quarter. This is equivalent to a gearing level of 18.8%, including the impact of the charge taken related to the settlement, within BP’s 10-20% target band.
BP also today announced a quarterly dividend of 10 cents per ordinary share, expected to be paid in September.
BP’s operating cash flow in the second quarter was $6.3 billion. This compares with $7.9 billion a year earlier.