BP reported its results for the second quarter of 2015. Underlying replacement cost profit for the quarter was $1.3 billion, compared with $2.6 billion for the previous quarter and $3.6 billion for Q2 2014.
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The result reflected the impact of continued low oil and gas prices, a reduced contribution from Rosneft, and one-off charges arising from circumstances in Libya, but also continuing strong earnings from BP’s downstream businesses and lower cash costs throughout the Group.
Following the announcement on July 2, that BP had reached agreements in principle to settle all outstanding federal and state claims and claims made by more than 400 local government entities arising from the 2010 Deepwater Horizon oil spill, an additional non-operating pre-tax charge of $9.8 billion was included in the result for the second quarter.
As a result of this charge, together with other non-operating items and fair value accounting effects, BP reported a replacement cost loss for the quarter of $6.3 billion.
BP announced a quarterly dividend of 10 cents per ordinary share, expected to be paid in September.
BP’s operating cash flow in the second quarter was $6.3 billion. This compares with $7.9 billion a year earlier.
Organic capital expenditure in the quarter was $4.5 billion, bringing the total for the first half of the year to $8.9 billion. Full year organic capital expenditure is now expected to be below $20 billion. BP has also now agreed $7.4 billion of divestments towards the current $10 billion divestment programme.
BP’s simplification and efficiency programmes to sustainably reduce non-safety-critical cash costs are delivering results throughout the Group; total cash costs in 2015 to date are estimated to be around $1.7 billion lower than the same period last year. In the second quarter BP took a further $270 million non-operating restructuring charge, bringing the total over the past three quarters to $920 million. It now expects restructuring charges to total near to $1.5 billion by end-2015.
At the end of the quarter, BP’s net debt was $24.8 billion, $293 million lower than at the end of the first quarter. This is equivalent to a gearing level of 18.8%, including the impact of the charge taken related to the settlement, within BP’s 10-20% target band.
BP’s Upstream segment reported an underlying pre-tax replacement cost profit of $0.5 billion for the quarter, compared with $0.6 billion in the first quarter and $4.7 billion in 2Q 2014. Compared with a year earlier, the result was mainly affected by lower oil and gas prices. The result also included around $600 million of exploration write-offs and other costs related to BP’s activities in Libya, primarily due to circumstances in the country.
BP reported underlying pre-tax replacement cost profit for the Downstream segment of $1.9 billion, compared with $2.2 billion in the first quarter and $0.7 billion in 2Q 2014. Compared to last year, the result was driven by good refining performance and capture of improved margins, a higher contribution from supply and trading and stronger earnings from both the lubricants and petrochemicals businesses. ■