Shares in BP fell by 4% this week after the company unveiled disappointing second-quarter earnings figures. Underlying earnings at the oil giant slumped by 35% to $3.7bn – worse than analysts’ forecasts. Falling crude and American natural gas prices, due to the shale gas boom, hit profits. BP’s results were considerably worse than its rivals due to a $4.8bn charge, which included a write-down of its US refineries and shale gas assets.
Chief executive Bob Dudley faces criticism from shareholders who fear the company has lost direction following the Deepwater Horizon disaster in 2010.
What the commentators said:
BP’s figures are “the crowning disappointment” of a tough oil reporting season, said Reuters Breakingviews. Even though many of the write-downs may be one-off, “BP may not be a good bet for investors”. The shortfall is “damaging” to BP’s attempts to regain credibility following Deepwater. While BP “isn’t the only oil major” to miss forecasts, with the Gulf of Mexico “still hanging over its head” and uncertainty in Russia, “no other oil major has quite so much to prove”.
Rex Tillerson at ExxonMobil complains that “we are all losing our shirts” on low US natural gas prices, says Lex in the FT. But, unlike European rivals, Exxon is not being “forced to take a charge on its shale gas assets”. BP’s writedown should not “dent” its valuation, but it came with “lots of other bits of bad news”. BP boss Dudley flagged that BP would be “spending heavily” on capital maintenance. But with issues such as the US spill settlement to worry about, these numbers are a “distraction”.
Last year Dudley said BP had turned a corner, but it has “headed down a cul-de-sac”, said Andrew Peaple in The Wall Street Journal. The company could add value by “splitting itself up”. Its upstream assets alone are worth 561p a share, but there seems “little chance” of this happening. Reshaping BP “must wait” until the future of its TNK-BP stake is resolved and the final “oil-spill bill” may offset any Russian sale. If it is found grossly negligent, Macquarie estimates the fines could be $14bn more than BP’s current $3.5bn provision.