Business/Economy

BP's earnings fall nearly 24%

LONDON -- The British oil giant BP reported Tuesday that first-quarter earnings, excluding extraordinary items, fell 23.5 percent compared with the period a year earlier, as production slipped and it continued to sell assets.

The earnings of $3.2 billion were slightly above analysts' forecasts for $3.1 billion, but significantly lower than the $4.2 billion the company posted in the first three months of 2013.

Year-on-year comparisons are difficult to make at BP because the company has been downsizing rapidly to pay damages for the 2010 Gulf of Mexico oil spill as well as to finance share buybacks.

BP is a smaller company now, producing around 3 million barrels of oil equivalent a day, compared with about 4 million barrels a day before the spill.

The company said the sale of oil fields was a big reason for the fall in earnings. Production, excluding what BP books from its nearly 20 percent holding in the Russian oil company Rosneft, was down 8.5 percent from the period a year earlier. BP also took a $500 million write-down on shale rock acreage in the United States and an $845 million write-down on an offshore block in Brazil.

In a note to clients Tuesday, analysts at Liberum Capital, an investment bank in London, said the results were "solid although the dividend increase was less than we hoped," referring to an increase in the quarterly payout, to 9.75 cents from 9.5 cents.

First-quarter revenue fell to $91.7 billion, from $94.1 billion in the period a year earlier, while net income fell about 79 percent, to $3.5 billion. In the first quarter of 2013, however, BP's reported earnings of $16.8 billion included a $12.5 billion gain from its sale of a Russian affiliate, TNK-BP, to the Russian state oil company Rosneft.

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BP emphasized that it would continue the recent focus on asset sales and returning money to investors. BP said it had already agreed to more than $3 billion in such disposals this year, including the recent sale of a handful of small oil fields in Alaska. BP plans $10 billion in sales through 2015.

The company said it had spent $7.6 billion in a continuing $8 billion share buyback program. BP's chief executive, Robert W. Dudley, suggested additional buybacks were likely. "We expect to use surplus cash to support further distributions," he said.

BP's share price rose Tuesday, recovering from a dip Monday after the United States announced sanctions on Igor Sechin, the chief executive of Rosneft, in the standoff with Moscow over the situation in Ukraine. BP's stake in Rosneft is valued at about $13 billion.

Dudley serves on Rosneft's board, and BP was planning to place technical experts inside the Russian company to help it with production and management. BP also anticipated forming joint ventures inside and outside Russia with Rosneft. At the least, the company will need to carefully consider the relationship.

During a call with analysts Tuesday, Dudley said he would be able to continue attending Rosneft board meetings because the Russian company had not been hit with sanctions.

BP says it is still studying what the sanctions may mean for its business in Russia.

"We will of course comply with all relevant sanctions," Toby Odone, a BP spokesman, said in a statement. "We are committed to our investment in Rosneft, and we intend to remain a successful, long-term investor in Russia."

By STANLEY REED

The New York Times

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