BP Q1 profits surge on Russian joint venture sale

AP News
Posted: Apr 30, 2013 7:07 AM

LONDON (AP) — BP's sale of its Russian joint venture helped it more than triple first-quarter profits, the oil company said Tuesday in a further sign that its disposal program in the wake of the Gulf of Mexico oil spill disaster is on track.

It said its replacement cost profits rose to $16.5 billion from the $4.7 billion for the same period last year, largely reflecting a one-off gain from the sale of its stake in TNK-BP. The replacement cost figure omits gains or losses in inventories, making it similar to net profit figures used by U.S. oil companies. BP's non-replacement cost net profit was $16.6 billion against $5.7 billion this time last year.

Group CEO Bob Dudley said the results "demonstrate the progress BP is making in delivering the performance milestones." Investors certainly thought so, and the stock was trading 3.5 percent higher in London at 473 pence.

BP announced last month that it was buying back $8 billion of shares using money from the sale of its stake in Russian joint venture TNK-BP to Rosneft. BP now holds a total 19.75 percent interest in Rosneft.

The results come at a very uneasy time for the company, which has been functioning under a cloud since the 2010 well blowout in the Gulf of Mexico that killed 11 workers. Some 200 million gallons of oil spilled, smearing the shoreline of several states and fouling the Gulf of Mexico.

U.S. government investigations blamed the spill on cost-cutting and time-saving decisions made by BP. A trial in New Orleans to determine the company's civil liability just wrapped up its first phase.

Billions are at stake.

Even as it tries to deal with the aftermath of 2010, BP is streamlining and undergoing dramatic change, said equity analyst Keith Bowman of Hargreaves Lansdown Stockbrokers. He said the oil giant continues to shrink, with production down 5 percent year-over-year, "although new production opportunities are being cultivated."

"In all, underlying progress is being made," Bowman said. "However, until the uncertainty of U.S. legal settlement is lifted, BP remains a higher risk investment in a traditionally lower risk sector, with consensus opinion currently denoting a hold, albeit a strong one."

The first phase of the trial wrapped up earlier this month, featuring testimony by witnesses for the federal government, a team of private plaintiffs' attorneys, rig owner Transocean Ltd. and cement contractor Halliburton. This part of the trial is meant to identify the causes behind the BP's Macondo well blowout and will assign fault to the companies.

The second phase of the trial will start in September. This part of the trial will explore BP's efforts to stop the flow of oil — and assess how much spilled.

"While the final decision rests with the court, BP believes the evidence and testimony presented at trial confirms that it was not grossly negligent and that the accident was the result of multiple causes, involving multiple parties," the company said in a statement.

The total charge for the Gulf of Mexico oil spill remained at $42.2 billion.