BP pledges North Sea commitment as profits dip

Work around the Deepwater Horizon site dented BP's profits. Picture: Reuters
Work around the Deepwater Horizon site dented BP's profits. Picture: Reuters
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OIL major BP pledged its commitment to North Sea oil production yesterday after some doubts had arisen when it sold a range of British oil fields last year to the Abu Dhabi National Energy Company, Taqa, for $1.1 billion (£687 million).

Bob Dudley, BP’s American-born chief executive, said: “Some people think we are backing away from investment in the North Sea. We have divested a chunk in the North Sea.

“But we are working on the giant Clair Ridge project, a £10bn investment west of Shetland that will produce all the way to 2050. West of Shetland is where we have a real focus.”

His comments came as BP posted a $1bn slump in fourth-quarter “underlying replacement cost” profit to $4bn having divested $38bn of assets in the past two years to help pay for the damage of the 2010 Deepwater Horizon environmental catastrophe in the Gulf of Mexico.

Replacement cost profit strips out gains and losses due to changes in value of oil stocks held by energy companies.

Full-year profits for 2012 at BP, which recently announced a major joint venture with state-owned Rosneft in Russia, fell to $17.6bn from $21.6bn.

It said the cumulative cost of the Deepwater tragedy, which killed 11 oil workers, had reached $42.2bn, the company having taken a further $4bn charge in the fourth quarter.

The group still needs to settle the bill for civil claims, but Dudley said it will only be on reasonable terms, with the trial scheduled to start later this month.

BP said the profits fall was due in part to lower production because of asset sales and natural field decline, offset by five major exploration and production projects coming on stream in 2012. These include PSVM in Angola and Skarv in Norway. BP said it was still assessing the impact of the terrorist attack at its joint venture in the In Amenas gas site in Algeria last month, but was committed to the country where it has operated for 60 years.

Referring to the potential terrorist threat around the world, Dudley said: “We are on heightened alert. But I don’t want to overreact as to whether this is a trend or not.”

Profits at the group’s shrinking exploration and production operation fell to $4.3bn in the fourth quarter compared with $5.9bn a year ago. Its divestments have cost it 500,000 barrels of oil per day, with production down 7 per cent in the quarter.

The company also included only 21 days of income from its TNK-BP joint venture in Russia that has been sold to Rosneft.

“Downstream” activities – including refining, petrochemicals and marketing – turned in a much better performance, however, with quarterly profits surging to $1.4bn from $759m.

Shareholders get a fourth-quarter dividend of 9 cents, up from 8 cents in the third quarter and 7 cents in the final quarter of 2011.

Dudley said: “We have moved past many milestones in 2012, repositioning BP through divestments and bringing on new projects. This lays a solid foundation for the long term.”

Shares in BP closed up 6.65p, or 1.4 per cent, at 468.7p.