BP sees massive cut in profits in Q2

BP has reported a massive fall in profits in the second quarter of 2012. The company made $238 million in the three months from April to the end of June.

This compares to profits of $5.4 billion over the same period a year before.

The dramatic fall was influenced by the company having to revalue many of its assets, including refineries and US shale gas assets. BP said that the profit fall was also influenced by the suspension of its Liberty offshore project in Alaska.

Additionally the price of oil fell in the quarter as did the price of natural gas in the US. BP also cut production volumes in the Gulf of Mexico and saw lower than expected income from its joint venture in Russia with TNK-BP.

IN 2010, a BP oil rig exploded in the Gulf of Mexico killing 11 people and causing massive environmental damage as four million barrels of oil leaked into the sea. The incident did serious damage to BP’s reputation and the financial impact will exceed £20 billion.

A pre-tax charge of $847 billion was also taken to reflect an increase in provision for liabilities as a result of the Gulf of Mexico oil spill.

Underlying replacement cost profit was $3.7 billion, compared to $5.7 billion for the same period in 2011 and $4.8 billion in the first quarter of 2012.

Bob Dudley, BP group chief executive, said: “We recognise this was a weak earnings quarter, driven by a combination of factors affecting both the sector and BP specifically.
“The effects of price movements have impacted our earnings in the quarter.

“Rebuilding trust with our shareholders and other stakeholders is vitally important. We are making progress against the critical strategic and operational targets we have set ourselves and are confident that this will deliver long-term, sustainable value.” 

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