BP misses second-quarter profit forecast on spill charge

BP's second-quarter profits missed expectations on Tuesday after the British oil and gas company took a USD 9.8 billion pretax charge related to a settlement of the 2010 Gulf of Mexico spill.

The company also lowered its expected full-year organic capital spending to below USD 20 billion after cutting it by 13 percent earlier this year as the industry continues to grapple with low oil prices.

BP maintained its dividend at 10 cents per ordinary share.

BP's underlying replacement cost profit, the company's definition of net income, was USD 1.3 billion, lower than analysts expectations of USD 1.64 billion.

This month, BP reached an USD 18.7 billion settlement with the US government and five states to resolve most claims from the deadly Gulf of Mexico oil spill five years ago in the largest corporate settlement in US history.

The April 20, 2010, rig explosion and spill killed 11 workers and spewed oil for nearly three months on to the shorelines of several states.

Oil prices averaged USD 60 a barrel in the second quarter, up around USD 5 a barrel from the first quarter but down from USD 110 a year earlier.

In a repeat of first-quarter trends, BP's refining and trading division, known as downstream, performed strongly while production delivered weak results amid falling oil prices.

Downstream generated USD 1.63 billion in replacement cost profit for BP, up from USD 933 million a year earlier but down from an exceptionally strong USD 2.08 billion in the first quarter.

For the third quarter, BP said it expected "reduced refining margins and lower levels of turnaround activity. "

BP's upstream operations delivered a replacement cost profit of just USD 228 million versus USD 4.05 billion a year earlier and USD 372 million in the first quarter.

BP's global refining margin benchmark rose in the second quarter to USD 19.4 a barrel from USD 15.55 a year earlier and from USD 15.3 in the first quarter.

As a rule of thumb, each USD 1 in refining margins equates to around USD 500 million in BP's pretax replacement cost operating profit, according to the company.

"Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the Group and we continue with capital discipline and divestments," Chief Executive Officer Bob Dudley said in a statement.

BP said that besides the US settlement the second-quarter result reflected the impact of continued low oil and gas prices, a reduced contribution from Russia's Rosneft, and one-off charges arising from unrest in Libya.

Also on Tuesday, Norwegian oil major Statoil posted higher-than-forecast earnings while lowering its capital spending outlook for the year.