BP swings to 2Q loss on US Gulf charge: UpdateOREANDA-NEWS. August 03, 2015. BP recorded a loss in the second quarter after taking a hefty charge following agreements in principle to settle US federal and state claims related to the 2010 Gulf of Mexico crude spill. Excluding the charge, its profit fell from a year earlier because strong downstream results and cost-cutting were not enough to offset sharply lower oil and gas prices, disruptions in Libya and a reduced contribution from Russia's state-controlled Rosneft.

BP made a loss of \\$6.3bn in the second quarter, compared with a profit of \\$3.2bn in April-June of 2014. The result includes a \\$9.8bn pre-tax charge associated with the US Gulf spill agreements. BP's total quarterly charge related to the spill amounted to \\$10.8bn, bringing the total cumulative pre-tax charge for the incident to \\$54.6bn.

The company's underlying profit, which excludes the US Gulf charge and other non-operating items, fell to \\$1.3bn in the quarter, compared with \\$3.6bn a year earlier and \\$2.6bn in the first quarter of this year. The benchmark Brent crude price averaged \\$62/bl in April-June, down from \\$110/bl a year earlier, but up from \\$54/bl in the first quarter.

BP's operating cash flow fell to \\$6.3bn in the quarter from \\$7.9bn a year earlier, but was much higher than \\$1.9bn in the first quarter.

"In the past few weeks oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran," said chief executive Bob Dudley. "I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future."

BP has so far divested \\$7.4bn of assets towards its plans to sell \\$10bn between October 2013 and the end of 2015, of which second-quarter disposal proceeds were \\$500mn.

The company's organic capital expenditure (capex) reached \\$4.5bn in the second quarter and \\$8.9bn in the first half of the year. BP now expects its full-year capex to be below its previous guidance of \\$20bn.

"Simplification and efficiency programmes" have allowed BP to cut total cash costs so far this year by about \\$1.7bn compared with the same period last year. The company took a \\$270mn non-operating restructuring charge in the second quarter, bringing the total since October to \\$920mn. BP now expects restructuring charges to reach \\$1.5bn by the end of 2015, up from \\$1bn announced last December.

"We can see clear progress in our capital programme and from our work to reset and reduce cash costs," said chief financial officer Brian Gilvary. "Our focus remains on rebalancing the company's sources and uses of cash in a lower price environment."

BP's net debt stood at \\$24.8bn at the end of the second quarter, slightly less than at the end of the previous quarter and compared with \\$24.4bn a year earlier. "This is equivalent to a gearing level of 18.8pc, including the impact of the charge taken related to the settlement, within BP's 10-20pc target band," the company said.

BP's production outside Russia was 2.112mn b/d of oil equivalent (boe/d) in the second quarter, or 0.3pc higher than a year earlier. Its underlying oil and gas production, which is adjusted for divestments and entitlement impacts in production-sharing agreements, fell by 1.7pc year-on-year, "mainly due to increased seasonal turnaround activity partly offset by the ramp-up of major projects which started up in 2014", BP said.

The company expects third-quarter production to be "broadly flat with the second quarter, primarily reflecting the continuation of seasonal maintenance activity consistent with the second-quarter activity levels".

Rosneft, where BP holds a 20pc stake, contributed 1.017mn boe/d to BP's total output in the second quarter, up from 999,000 boe/d a year earlier. Rosneft also generated a \\$510mn pre-tax profit for BP, compared with \\$1bn a year earlier.

BP's upstream pre-tax profit was \\$228mn, compared with \\$4.05bn in the second quarter of 2014. In Libya, where BP has stopped operations, it recorded second-quarter "exploration write-offs and other costs" of \\$598mn. "There is significant uncertainty on when drilling operations might be able to proceed," the company said.

The firm's downstream business made a pre-tax profit of \\$1.6bn compared with \\$933mn a year earlier. "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," BP said. In the third quarter, BP expects reduced refining margins and lower levels of turnaround activity.

The company kept its second-quarter dividend unchanged from the first quarter, at 10? per ordinary share.