BP and BG Group profits slide as crude price drops

Energy giants BP and BG Group both reported a slump in profits yesterday as the lower oil price took its toll during the third quarter.
Costs of the Deepwater Horizon have added to uncertainty. Picture: GettyCosts of the Deepwater Horizon have added to uncertainty. Picture: Getty
Costs of the Deepwater Horizon have added to uncertainty. Picture: Getty

BP found itself under pressure from all sides, as sanctions against Russia and a falling rouble meant income from its stake in Rosneft was down by more than four fifths.

The company reported profits of $3 billion (£1.9bn) for the three months to 30 September, against $3.7bn a year earlier.

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It added that any further claims against it resulting from the 2010 Gulf of Mexico disaster would have to be paid from its balance sheet after it exhausted the $20bn trust fund set up after the spill. However, the company still expects the total bill to be around $43bn.

Despite everything, BP offered a boost to UK pension funds by increasing its quarterly dividend, earning praise from analysts who had been expecting the weaker bottom line.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Despite being attacked on many fronts, BP is steadfastly continuing on its road to recovery.

“The strength of sterling, the weakness of the oil price, the sanctions on Russia, coupled with the sharp drop of the rouble, and the ongoing uncertainty as to a final figure on the Gulf of Mexico settlement have all weighed on the company and may well have crushed a lesser force.

“BP’s response has been to generate strong cashflow, enabling an increase to the dividend and a continuation of the buyback programme, a reduction in capital expenditure and an improved downstream performance, driven by an improved refining environment.”

Meanwhile, BG Group reported a worse-than-expected 26 per cent fall in third-quarter operating profit to $1.3bn as its output in Egypt halved.

Britain’s third-biggest energy firm said it was starting to reap benefits from costly investments in Brazil and Australia.

Analysts also welcomed reassurance that BG’s flagship Queensland Curtis LNG project, a $20.4bn export facility, was on track to deliver its first cargo by the end of the year. But in Britain, BG has delayed an investment decision at its Jackdaw project as it studies lower risk options.