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BP’s Profit Plummets To $720M On Weak Refining Margins, Oil Prices

Oseberg Platform North Sea

BP Plc reported on Tuesday a profit of US$720 million for the second quarter, down from US$1.3 billion for the second quarter of 2015, citing lower oil and gas prices, and significantly lower refining margins.

The US$720-million underlying replacement cost profit, BP’s definition of net profit, is US$120 million below an analyst consensus provided by the company and lower than the US$819-million estimate of 13 analysts polled by Bloomberg.

The Brent price was US$46 on average in the second quarter this year, up from US$34 in the first quarter, but still well below the US$62 average in the second quarter of 2015. Despite the fact that refining margins improved from the first quarter, they were at their weakest for a second quarter since 2010, BP noted.

The downstream business booked an underlying pre-tax replacement cost profit of US$1.5 billion, down from US$1.9 billion in the second quarter last year, as significantly weaker refining margins more than offset the benefits of lower costs and stronger fuels marketing performance, BP said.

For the first half of 2016, the group’s underlying replacement cost profit fell to US$1.252 billion from US$3.89 billion, chiefly due to lower oil and gas realizations on the upstream result. Organic capital expenditure came in at US$7.9 billion, BP said, expecting full-year 2016 capex to be below US$17 billion. Upon announcing the first-quarter results in April, BP said it expected this year’s capex at around US$17 billion.

Related: ‘’The Worst Is Behind Us’’ Schlumberger CEO Sees Reason For Optimism

In the second quarter, BP booked a US$5.2 billion pre-tax charge for the Deepwater Horizon disaster, which brings the total pre-tax charge for the 2010 rig explosion to US$61.6 billion. The latest charge includes all material liabilities BP has estimated regarding the incident.

“We are very pleased to have finally drawn a line under the material liabilities for Deepwater Horizon,” CEO Bob Dudley said.

Looking ahead, Dudley said the group expected the environment to continue to be challenging. BP, however, has a pipeline of new projects expected to add 500,000 boepd of new production capacity by the end of 2017, the chief executive noted.

By Tsvetana Paraskova for Oilprice.com

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