Russian crisis hits BP's Rosneft profits

BP's profit from its stake in Russia's Rosneft was hit by the falling value of the ruble, pushing its contribution to BP's underlying profit down by 75% to $271m (£161m) in the first three months of this year.

Profit from Rosneft was up from $85m a year earlier but that period only covered 11 days after BP acquired its stake.

BP's partnership with the Russian state-controlled oil company is in the spotlight after the US government added Rosneft's chairman, Igor Sechin, to its sanctions list.

The ruble has dropped against the dollar over fears about the crisis in Ukraine and the potential effects on Russia's economy. The US imposed further sanctions on Russians with close links to president Vladimir Putin on Monday.

BP's 19.75% stake in Rosneft could come in for US attention as BP's American chief executive Bob Dudley trys repair the damage caused by the 2010 Gulf of Mexico oil spill.

Dudley said last month it was "business as usual" for BP in Russia and that the company wanted to keep its stake in the country's biggest oil company. A BP spokesman reiterated the company's commitment to Russia on Monday.

BP's group profit fell 24% in the first quarter but the company increased its dividend and pledged to return more cash to shareholders.

So-called underlying replacement cost profit for the first three months of BP's financial year dropped to $3.2bn from $4.2bn a year earlier. The figures exclude businesses sold and non-operating items.

Group profit was slightly higher than analysts' consensus forecast of $3.2bn. Upstream profit fell to $4.4bn from $5.7bn a year earlier because of "the impact of divestments" and higher non-cash costs. Costs included the write-off of assets in Utica shale, Ohio, where BP has decided not to go ahead with development.

BP increased its quarterly dividend by 8.3% to 9.75 cents a share, in line with the group's intention to distribute more of its cash to shareholders.

Chief executive Bob Dudley said operating cash flow was strong in the first quarter at $8.23bn. The company is near the end of an $8bn share buyback programme and has agreed asset sales of $3bn towards its plan to offload $10bn of assets by the end of next year.

Dudley said: "We expect material growth in operating cash flow, coupled with disciplined investment, to deliver sustainable growth in free cash flow. This will support increasing distributions to our shareholders. As well as progressive growth in the dividend per share, we expect to use surplus cash to support further distributions through share buybacks or other mechanisms."

The company said its net charge for the Gulf of Mexico spill stayed at $42.7bn, not including business loss claims it is contesting on the grounds they are unfounded. At the end of the quarter, $6.6bn remained in the $20bn trust fund set up to pay compensation to victims of the 2010 disaster.

Powered by article was written by Sean Farrell, for on Tuesday 29th April 2014 10.20 Europe/London © Guardian News and Media Limited 2010


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