OIL giant BP posted lower than expected profits in a further sign of the pressure the firm faces in looking to reverse its fortunes in the wake of the Gulf of Mexico disaster.
The company reported profits of £3.2bn in the three months to June compared with a loss of £10.3m in the same period a year ago.
BP has benefited from higher oil prices, driven up in the period by political unrest in the Middle East and North Africa, as well as higher refining margins – the difference between the value of crude oil and the products for which it is used.
But gains were offset by an 11% drop in production in the three months as a result of the suspension of drilling in the Gulf of Mexico and £15.3bn of asset sales.
BP shares fell by -12 after the results came in below City expectations for replacement cost profits of £3.7bn. BP said the average cost of Brent crude in the period was $117.04 a barrel – a 50% increase compared with $78.24 in the same period last year.
The company also said it was benefiting from improved refining margins – up to 13% from 11%.
The improvement came as the cost of petrol at the pumps hit 135.6p a litre in June.
The Gulf of Mexico clean-up continued in the quarter – with £4.1bn now paid out in claims and in government payments to fund economic and environmental restoration.
BP said the total charge for the Deepwater Horizon incident, which killed 11 men in April last year, reduced by £366.8m in the quarter as it received settlement pay-outs from partners in the Macondo well.
Chief executive Bob Dudley warned that production in the third quarter – July to September – would continue to reflect a programme to offload some operations to meet its Gulf of Mexico bill. Assets sold include ones in the USA, Argentina, Egypt, Venezuela and Vietnam.