BP PLC posted a loss of more than $6 billion Tuesday in its results for the second quarter of 2015. Low oil prices and a multibillion-dollar charge from the 2010 Gulf of Mexico oil disaster slammed the company’s earnings, marking BP’s second quarterly loss in the past six months.
The British oil giant said its replacement cost loss, or net negative income, was $6.27 billion, compared with a profit of nearly $3.2 billion a year earlier.
The steep drop includes a $9.8 billion pretax charge that BP recorded as part of its $18.7 billion agreement with the U.S. government and five Gulf Coast states. The deal settles all legal claims arising from the Deepwater Horizon disaster, which killed 11 rig workers and spewed more than 3 million barrels of crude oil into the Gulf of Mexico five years ago. So far, the well blowout has cost the company $55 billion in pretax charges for cleanup, penalties and victim compensation.
Mounting spill costs are exacerbating the damage wrought by lower oil prices on BP's earnings. Brent crude, the global benchmark, averaged $62 a barrel in the second quarter, compared with $110 a barrel in the same period last year, BP said.
Cheaper crude also battered BP’s stake in Russia’s state-controlled oil company. BP’s underlying net income from OAO Rosneft fell by nearly half in the second quarter to $510 million, from $1 billion in the same period last year. The chaos and armed conflict in Libya also took its toll on BP’s upstream results. The company was hit with a $600 million charge relating to its exploration and operational activities in the North African country.
“The external environment remains challenging,” BP Chief Executive Officer Bob Dudley said in a statement Tuesday. “But BP moved quickly in response and we continue to do so.”
The oil giant sold off more than $40 billion in assets in recent years to raise cash for spill-related cleanup and legal costs. This year, BP said it will cut spending to below $20 billion, compared with previous guidance of up to $26 billion. Executives also delayed projects with reserves of more than 3.5 billion barrels of oil and gas.
Dudley said the cutbacks will help the British giant weather the continued drop in oil prices. Brent crude prices have fallen further in the third quarter, trading around $53 a barrel Tuesday morning. Global oil supplies continue to outpace weaker demand, while the recent nuclear deal with Tehran has raised concerns that new Iranian exports could worsen the market imbalance.
“I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future,” Dudley said.
BP’s second-quarter losses were steepest in the upstream business, which includes oil exportation and production. Pretax earnings fell to $400 million, from $4 billion a year earlier. But downstream operations, which include refining and marketing, fared much better. Pretax earnings for the category jumped nearly 75 percent in the second quarter to $1.6 billion, up from $933 million the previous year.
BP’s operating cash flow in the second quarter was $6.3 billion, compared with $7.9 billion a year earlier. The company also announced Tuesday a quarterly dividend of 10 cents per ordinary share to be paid in September.
Organic capital expenditure for the quarter was $4.5 billion, bringing the total for the first half of 2015 to $8.9 billion.