BP profit hit by refining weakness, ups spill charge

Reuters with CNBC.com
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BP, the West's no.4 oil company, reported weaker quarterly profits after its refining business swung to a loss, and said it would increase the accounting provision for the 2010 U.S. oil spill by $200 million.

Underlying replacement cost profit, a common accounting measure to report profits in the oil industry which takes into account the fluctuations in the price of oil, came in at $2.809 billion. That was above a forecast supplied by the company of $2.7 billion. The figure came in at $3.852 billion in the fourth quarter of 2012.

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BP's lower profits are in step with what has been a torrid earnings season across the "big oil" sector, which are struggling to grow profits amid rising costs, the expense of finding fresh reserves and weak refining margins.

The world's largest publicly traded oil company by market value, Exxon Mobil, reported lower-than-expected quarterly profit last week, while Chevron and BP's European rival Shell both issued profit warnings in January.

Chris Ratcliffe | Bloomberg | Getty Images

BP, unlike its rivals, however, is also dealing with the fallout from the Gulf of Mexico oil spill which killed 11 men and despoiled the surrounding coastline in the United States' worst offshore environmental disaster.

BP said the provision to cover the spill's clean-up, fines, compensation and legal costs had risen to $42.7 billion from $42.5 billion last year.

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BP said the fall in its earnings, which were hurt by difficult conditions in its shrinking refining business and costs associated with the start-up of its Whiting refinery in the U.S., were partially offset by higher earnings from Rosneft.

Rosneft, the state-controlled Russian company into which BP folded its Russian business last year in exchange for a 19.75 percent stake, delivered $1.1 billion of the profits.

The group proposed a dividend of 9.5 cents per share, up from 9 cents in 2012.

Production in 2014 is expected to be lower than 2013, mainly due to the expiry of the Abu Dhabi onshore concession, the group said.

It expected refining margins to improve somewhat from the particularly low levels seen in the fourth quarter of 2013. The fuels and petrochemicals environments would remain challenging, BP said.

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