British oil giant BP today reported a net loss of £890.24 million ($1.4 billion) in the second quarter of 2012, compared with a profit of £3.56 billion ($5.6 billion) last year.
The 35% drop in profit can be blamed to reducing oil prices and a cut in output due to an extensive maintenance programme. Europe’s second-biggest oil company also reported drop in production by 8% to 2.3m barrels of oil equivalent a day.
Production reduced in all the ventures, excluding output from the Russian TNK-BP venture. According to the London-based company, the profits were affected by weaker oil and US gas prices, as well as reductions in output due to planned maintenance.
BP said that the planned maintenance particularly affected high-margin production from the Gulf of Mexico, and lower net income from TNK-BP. Company’s share of net income from its troubled TNK-BP partnership was £445.12 million ($700 million) lower than the first quarter.
The impact of a reduction in oil prices as well as the lag in Russian oil export duty, which is based on earlier higher oil prices, affected the net income of BP. However, increase in BP’s provision for various costs and litigation relating the Gulf of Mexico oil spill helped the company take a pre-tax charge of £539.18 million ($847 million) in the second quarter.
Group Chief Executive, Bob Dudley admitted that the company had a weak quarter, but added that company is in rebuilding phase after the 2010 Gulf of Mexico spill. The firm is focusing on higher-margin fields and selling off less profitable assets, said Dudley. BP has already announced it plans to dispose of its half of TNK-BP, which accounts for about a quarter of BP’s production.
“The effects of price movements have impacted our earnings in the quarter,” Dudley said in a statement today. “Our extensive turnaround and maintenance programme, which will continue into the third quarter, is also affecting some aspects of our near term results,” he added.
Bob Dudley said that company expects to gain earning momentum in 2013 as BP completed payments into the Gulf of Mexico Trust Fund, as high-value production comes back on line, and as the impact of new projects ramps up.