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BP reports jump in profits; warns of potential Russian impact

Published: 18:28 29 Jul 2014 AEST

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London-listed oil ‘super-major’ BP (LON:BP.), which reported a 34% jump of quarterly profit, warned investors that further economic sanctions against Russian interests may adversely affect its investment in Rosneft.

The group’s 19.75% stake in Rosneft, which is also part-owned by the Russian state, is a key asset in BP’s portfolio, which delivered US$1bn of net income during the second quarter.

Indeed, BP’s Russian partner paid the company a US$700mln dividend earlier this month.

During the quarter, BP’s production (including its Russian interests) totalled 3.1mln barrels oil equivalent per day.

For some time BP’s investors have hoped for distraction away from the American legal saga, in the wake of the Gulf of Mexico oil spill, though this new headache is unlikely to be what they had in mind.

Updating on the ongoing litigation in the US, BP told investors that its provision for compensation pay-outs has now been extended by US$260mln and the total pre-tax charge relating to the incident currently stands at US$43bn.

Nevertheless, operationally BP enjoyed a successful quarter, thanks to strong oil prices and its own production growth.

As production rose, with new higher margin upstream projects coming online and a step-up in heavy oil processing, BP increased profit to US$3.6bn, which is a 34% improvement on the corresponding period of 2013.

The company also continues to cash in portions of its asset portfolio and it is now more than a third of the way towards its US$10bn divestment target – the running total is now at US$3.4bn, following an agreed US$390mln sale of gas assets in Texas.

Chief executive Bob Dudley said: “This was another successful quarter, delivering both operational progress and robust cash flow.

“We are continuing to ramp-up the major new projects that drive delivery of cash flow and are also now seeing benefits from our focus on operating with greater reliability and efficiency.

"This operational momentum keeps us well on track to meet our 2014 targets.”

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