UK: BP hit by lower oil prices

BP has seen a profits fall.

BP has seen a profits fall. - Credit: PA

BP’s profits have fallen after the energy giant was hit by lower oil prices and a slump in earnings from its investment in Russia’s Rosneft.

The London-based company reported profits of 3 billion US dollars (£1.86 billion) for the three months to September 30, against 3.7 billion US dollars (£2.3 billion) a year earlier.

BP owns a 19.75% stake in Russian oil giant Rosneft but income from the holding slumped 86% against a year earlier to 110 million US dollars (£68.2 million) as sanctions against Russia over Ukraine have weakened the rouble.

Despite lower oil prices caused by uncertainty over the global economic outlook, BP offered a boost to UK pension funds today by increasing its quarterly dividend. Shares opened 1% higher today as analysts added that today’s profits figure was in line with expectations.

Meanwhile, the company continues to grapple with the costs of the Gulf of Mexico oil disaster in 2010, which left 11 workers dead and sparked the worst oil spill in US history.

It has exhausted the 20 billion US dollars (£12.4 billion) in a trust fund to pay claims, meaning subsequent costs will be charged to its income statement.

In the quarter it paid out an additional 314 million US dollars (£195 million) but the overall provision to cover claims and fines remains at 43 billion US dollars (26.7 billion).

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Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said factors such as the weaker oil price, Russian sanctions and the Gulf of Mexico settlement costs would have “crushed a lesser force”.

He said: “Despite being attacked on many fronts, BP is steadfastly continuing on its road to recovery.”

Mr Hunter highlighted BP’s strong cash flow, its reduced capital expenditure and improved performance from its downstream operations, where it is benefiting from an improved refining environment.