BP's $5bn profit is still less than slick

Profits at BP are up - but last year's Gulf of Mexico spill is proving hard to wash off...

by Dave Waller
Last Updated: 25 Oct 2011
BP may have grimaced at the deadly slick that spread in the aftermath of the Deepwater Horizon disaster last year, but at least now it’s back to looking at big numbers in the black. This time last year the oil giant was facing crippling losses of $17bn after the explosion, but for the equivalent quarter this year it was back to underlying profit of $5.6bn, boosted in no small part by soaring oil prices. There’s nothing like a little political unrest in the Middle East and North Africa to help an oil company overcome its own crises.

Indeed, oil averaged above $106 a barrel across the quarter in the wake of the geopolitical uncertainty surrounding supplies. The company also benefited from higher refining margins - the difference between the value of crude oil and the products it’s used for. Good news for BP execs – if not for the rest of us stood on a petrol station forecourt watching the digits on the pump race up.

But if you think that’d be cause for celebration at BP you’re mistaken: the sticklers in the City are still not happy, with analysts having expected profits of $5.95bn for the quarter. Production in the period was down, at 3.43m barrels of oil equivalent a day - 11% lower than the same period last year. That’s because BP still hasn’t resumed drilling in the Gulf of Mexico, and it’s sold $25bn worth of assets.

So it looks like the going’s not about to get any easier for chief exec Bob Dudley, who stepped into a particularly sticky seat when he took over from Tony Hayward last October. Not only did he fail to complete a crucial £10bn deal with Russia’s Rosneft earlier this year, but he’s so far failed to get BP’s share price up to the pace of Royal Dutch Shell. BP’s arch rival is expected to beat its record annual profit of $27.5bn set in 2008 - the highest amount ever made by a British company in one year.

There is one piece of good news – BP has begun paying its dividend again, at seven cents for the quarter, having suspended pay-outs in the wake of the spill. So while petrol prices may have the more immediate impact, chances are this will benefit the financial matters of a decent chunk of the population in some way.

Meanwhile Hayward may have got his wish to ‘get his life back’, the pressure’s very much on Dudley to show he’s got a plan for finally steering the company clear of this mess. He’s touting BP’s potential for long-term growth: nine new projects are expected to come on stream in 2012 and 2013, most in higher-margin areas like Angola, the North Sea and the Gulf of Mexico. And he’s doubling its exploration spending. He’ll no doubt be hoping it dredges up a way to pump some life into that share price…

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