BP profit falls as Gulf spill costs still weigh

Tue May 1, 2012 6:30am EDT
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By Tom Bergin

LONDON (Reuters) - BP Plc (BP.L: Quote) reported a bigger-than-expected profit drop on the back of a fall in production prompted by the need to sell oil fields to pay for the Gulf of Mexico disaster, raising concerns about the oil group's turnaround plan.

Europe's second-largest oil company by market value said on Tuesday output would continue to decline in the second quarter, helping send its shares down 3.6 percent to 429.3 pence by 0924 GMT against a 0.2 percent drop in the STOXX Europe 600 Oil and Gas index .

The shares are down 8.9 percent so far this year, against a 1.8 percent average drop among its industry peers.

Analysts at Citigroup said they had doubts about BP's ability to increase output, keep a lid on costs and maintain its interest in key assets where it has had disputes with partners.

The financial headwinds also mean BP will struggle to raise its dividend to the level it was at before the spill, when it was slashed, analysts at brokerage Bernstein said in a note.

BP unveiled plans to sell a number of mature fields in the Gulf but a spokesman denied the company was making a more general pullback from the region, saying the disposals reflected a new strategy of churning assets more quickly and focusing on larger, younger projects.

The London-based group added it would have to spend more than earlier expected to clean up America's worst-ever offshore oil spill, although this was offset by a drop in the expected cost of paying out claims after the company agreed a settlement with impacted individuals and businesses.

BP said its replacement cost (RC) net profit fell to $4.93 billion in the first quarter, compared with $5.61 billion in the same period last year. The drop was also driven by weaker refining results.   Continued...

A BP logo is seen on a petrol station in London. REUTERS/Suzanne Plunkett