BP PROFIT $720 MLN
BP today reported that profit for the second quarter of 2016 was $720 million on an underlying replacement cost basis, compared with $532 million for the previous quarter and $1.3 billion for the second quarter of 2015.
Underlying operating cash flow for the quarter – before pre-tax Gulf of Mexico payments – was $5.5 billion. This strong underlying cash flow resulted from continuing reliable operation of assets.
Progress also continued in resetting BP's capital and cost base. BP's cash costs over the past four quarters were around $5.6 billion lower than in 2014 and BP continues to expect these costs for 2017 to be $7 billion lower than in 2014. Organic capital expenditure for the first half of 2016 was $7.9 billion; full year 2016 capital expenditure is now expected to be below $17 billion.
BP today announced an unchanged dividend for the quarter of 10 cents per ordinary share ($0.6 per ADS), expected to be paid in September.
Earlier in July BP announced that it had made significant progress in resolving outstanding claims from the Deepwater Horizon accident and oil spill, including claims associated with the Plaintiffs' Steering Committee settlement and by individuals and businesses that opted out of and/or were excluded from that settlement. The progress made in resolving the opt-out and excluded claims was confirmed by a court order of 14 July. As a result, BP said it can now reliably estimate all remaining material liabilities in connection with the incident.
BP has taken a net post-tax non-operating charge in the quarter of $2.8 billion. This includes a pre-tax non-operating charge of $5.2 billion associated with the Deepwater Horizon liabilities and other positive tax credits. Including fair value accounting effects and inventory gains, this resulted in a reported loss for the quarter of $1.4 billion.
Bob Dudley, BP group chief executive said:
"We are very pleased to have finally drawn a line under the material liabilities for Deepwater Horizon. We will always be mindful of what we have learned from that tragic accident. BP today is a stronger, more focused and more disciplined company. We continue to actively develop a strong, balanced portfolio and we are managing the business for value over volume. Our relentless group-wide focus on capital and cost discipline is helping BP to become much more efficient while maintaining the investment needed for future growth.
"As we look forward we expect the external environment to remain challenging, but we have a strong pipeline of new projects which will add 500,000 barrels of oil equivalent a day of new production capacity by the end of next year. Beyond this lie further opportunities, including a number which we expect to deliver through innovative structures such as the recently announced Aker BP venture.
"We are delivering significant improvements to the business that will stick at any oil price. We are now well down the path of transforming our business to compete, whatever the future holds. We now see a much stronger outlook for BP and are focused on growth, both for this decade and beyond."
Compared with a year earlier, the underlying second quarter result was impacted by lower oil and gas prices and significantly lower refining margins, but this was partly offset by the benefit of lower cash costs throughout the group as well as lower exploration write-offs. The Brent oil marker price averaged $46 a barrel in the second quarter, up from $34 in the first quarter but still significantly lower than $62 a year earlier. While improved from the previous quarter, refining margins were the weakest for a second quarter since 2010.
In the first half of the year, BP received $1.9 billion from divestments, including the partial sale of its interest in Castrol India.
At the end of the second quarter BP's gearing level was 24.7%, within the target range of 20-30%.
Brian Gilvary, BP's chief financial officer, said: "We continue to reset our capital and cost base and are moving steadily towards our aim of rebalancing organic sources and uses of cash by 2017 in a $50-55 per barrel oil price range. This underpins our confidence in sustaining our dividend going forward."
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