Lower oil prices, combined with the diminishing value of the Russian rouble, have resulted in reduced profits at BP. The oil giant made $3 billion USD in Q2 (July to September), compared with $3.7 billion in the previous period in 2013.
The factors affecting profit levels included lower oil prices from the Urals and the company’s exposure to Russia via its 20pc Rosneft investment. Rosneft also surprised the market this week when it delayed the announcement of its own Q3 financials. The company gave no explanation, but analysts have noted that it is feeling the effects of the ongoing sanctions from the West over Ukraine. The rouble is now trading at an all-time low against the US dollar.
BP was also hit by the Deepwater Horizon disaster, which forced it to pay out a further $314 million. The cumulative clean-up fee for BP now stands at $20 billion.
Bob Dudley, the CEO, remained upbeat in the face of the profit warning, however, saying that BP’s underlying downstream production and refinery performance showed good results and a strong cash flow, even in the face of falling oil prices. Hargreaves Lansdown analyst Richard Hunter agreed with the analysis, saying that BP remained steadfastly on the course to financial recovery, thanks to a programme of capital expenditure reductions and a continuing strong cash flow.
BP’s share price has dropped by 14pc over the past three months. However, it made a modest gain of 0.4pc in today’s early trading.Last updated on 10:32AM - 06/11/14