London, UK | – BP Plc, one of the world’s biggest oil companies, reported second-quarter profit that lagged behind market expectations, and warned that low oil prices are here to stay.
Profit adjusted for one-time items and inventory changes dropped 64 percent from a year earlier to $1.3 billion, missing the $1.7 billion average estimate of analysts surveyed by Capital IQ.
The net result, which included a charge for liabilities from the 2010 Gulf of Mexico oil spill, was a $6.3 billion loss, compared with a $3.4 billion profit for the same period a year earlier.
Europe’s third-biggest energy producer is no longer benefiting from the strong trading that added about $350 million to profit in the first quarter, while a halt to operations in Libya eroded earnings from oil and gas exploration.
Capital investment fell 20 percent to $4.7 billion in the quarter from a year earlier, according to BP. The London-based company, among global oil majors to suffer from the collapse in crude prices, lowered its spending forecast for the year to less than $20 billion after investing about $23 billion in 2014.
“Oil prices will be lower for longer,” Chief Executive Officer Bob Dudley said on a conference call with analysts. BP is focusing on investment discipline, operating performance, asset sales and dividends, he said.
Brent crude, a benchmark for more than half the world’s oil, has dropped about 50 percent in the past year amid a global supply glut. The impact on drilling costs will allow BP to increase production, Dudley said. Output is languishing at 3.1 million barrels a day, 23 percent lower than in 2009.
The global market is oversupplied by about 1.5 million barrels a day because of strong production in the United States and increased exports from OPEC members like Saudi Arabia and Iraq. Production is also up this year in Brazil, Canada and Russia despite declining oil company profits and sanctions on Moscow.
The central causes of BP’s profit decline in its oil and gas operations were sharply diminished production in the Gulf of Mexico because of maintenance and a write-down on exploration in Libya because of political turmoil there. BP also reported an operating profit from oil and gas exploration and production of $494 million in the second quarter, compared with $4.7 billion a year earlier.
For the third quarter, BP said it expected “reduced refining margins and lower levels of turnaround activity”. It expects its output of oil and gas to be broadly flat in the current quarter.
BP also increased its estimate of the write-downs it would take this year for layoffs and other restructuring to nearly $1.5 billion, from $1 billion.
ADRs of BP gained 3.3 percent to $37.23 at 2:22 p.m. in New York.