BP Shares Up After $15 Billion Divestments Announced

Oil giant BP reported lower underlying third quarter profits on Tuesday, despite high oil prices, as production fell because of selloffs in the wake of the disastrous Gulf of Mexico oil spill.

BP sign
Ben Stansall | AFP | Getty Images
BP sign

Its shares rose 3 percent in early London trade following the announcement.

Replacement cost (RC) net profit, which strips out unrealized gains and losses related to changes in the value of fuel inventories, was $5.14 billion in the quarter, compared to $1.85 billion in the same period last year, when the group took a large charge related to the oil spill.

Underlying profits fell by 3.7 percent to $5.33 billion, ahead of an average forecast of $5.03 billion.

The oil giant will ramp up the pace of selling off parts of its business this year, with $45 billion worth of divestments by the end of 2013, up from the $30 billion previously planned.

Management said it expected improved cashflow, which they forecast will grow by around 50 per cent by 2014, would, in time, enable the group to pay investors higher dividends and restart a prgramme of share buybacks.

The company is assuming a $100 per barrel of oil environment in 2014, compared to an average oil price for the first nine months of 2011 of approximately $112.

BP has faced a storm of negative publicity and declining output after a devastating spill in the Gulf of Mexico last year.

It is now closer to returning to drilling in the Gulf after its exploration plan was approved by US regulators.

"BP was severely tested by the Deepwater Horizon accident," Bob Dudley, who replaced Tony Hayward following the accident, said in a statement. "It is now over a year since the well was finally sealed and we have continued to respond with a strong sense of corporate responsibility."

So far, BP has paid out $7.3 billion to victims of the spill.

BP is also battling a number of lawsuits over a proposed deal with Russian giant Rosneft.

The price of oil has fallen in recent months as fears about a double-dip recession grew. It has risen this week amid optimism about a new deal for the euro zone.