BP profit jumps but warns of Russia sanctions impact

Tue Jul 29, 2014 4:26am EDT
 
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By Ron Bousso

LONDON (Reuters) - Oil and gas producer BP reported a sharp rise in second quarter profits on Tuesday but warned that further Western sanctions on Russia could harm its business there and its relationship with Russian state oil company Rosneft.

BP said that to date, the sanctions had not had a significant effect on its business in Russia, where it makes about a third of its crude oil output, but that could change.

"If further international sanctions are imposed on Rosneft or new sanctions are imposed on Russia or other Russian individuals or entities, this could have a material adverse impact on our relationship with and investment in Rosneft, our business and strategic objectives in Russia and our financial position and results of operations," it said.

BP, by far the largest foreign investor in Russia through its 19.75 percent stake in Russian state oil company Rosneft, has repeatedly said it will stand by its investments in Russia since Moscow's intervention in Ukraine, where pro-Russian rebels are fighting government forces in the east of the country.

But things could get harder as the European Union weighs a new set of punitive measures against Moscow in response to the downing of a Malaysian airliner in eastern Ukraine. Additional sanctions could include financial restrictions and a ban on exports to Russia of equipment for use by oil and gas producers.

BP is not the first to make such a warning. Last week French oil services firm Technip cut margin targets for its onshore/offshore unit for this year and next, citing the possible impact of sanctions on Russia, which it said could interrupt income flows from Yamal LNG in Siberia.

For the second quarter, BP said underlying replacement cost profit rose to $3.6 billion, up 36 percent from a year earlier, beating analysts' forecast of $3.49 billion.

Its share of profits from Rosneft topped $1 billion in the quarter, nearly five times higher than a year earlier as a result of "favorable foreign exchange effects" with the Russian rouble. It also received an annual dividend of $690 million from Rosneft in the last two weeks.   Continued...

 
A BP logo is seen at a petrol station in London May 15, 2013.  REUTERS/Stefan Wermuth