BP Plc, Europe’s second-largest oil company, said fourth-quarter profit fell from a year earlier as output declined and refining margins weakened.
Profit adjusted for one-time items and inventory changes dropped to $2.8 billion from $3.9 billion a year earlier, the London-based company said in a statement.
BP follows Royal Dutch Shell Plc and Exxon Mobil Corp., the two biggest oil companies by market value, in reporting lower earnings as the cost of drilling rises, refining profits slump and prices stagnate. Chief Executive Officer Bob Dudley has sold less profitable fields in the wake of the 2010 Gulf of Mexico spill and focused on profit margins rather than volume targets.
“Everyone in the industry is facing similar issues,” said Peter Hutton, an analyst at RBC Capital Markets in London, in a Bloomberg Television interview. “Investors are looking for capital efficiency, and BP is in a reasonably good position. But one thing we’re still looking for is a return of operating momentum.”
Shell and BG Group Plc both issued profit warnings for the fourth quarter. BG today reported the first loss since 2000 on output disruptions from Egypt and higher exploration costs. Shell said last week it will accelerate asset sales to offset investment after capital spending reached a record in 2013.
BP’s production in the quarter fell 1.9 percent to 2.25 million barrels of oil equivalent a day. The figure excludes Russia , where BP completed the sale of its 50 percent in TNK-BP last year and acquired 20 percent of OAO Rosneft. Adjusting for disposals, underlying output rose 3.7 percent.
BP expects underlying output to rise this year, though reported production will drop because of divestments and the loss of about 140,000 barrels a day from the expiration of its concession in Abu Dhabi.
Adjusted profit in the refining and marketing arm of the company plunged to $70 million from $1.4 billion a year earlier in the fourth quarter. Narrower margins, a “weak result” from the trading business, start-up charges at the Whiting refinery after modernization and the disposal of the Texas City and Carson plants all hurt the bottom line, BP said.
The company will sell a further $10 billion of assets by the end of 2015 and give most of the proceeds to shareholders, favoring buybacks, it said in October. BP has bought back about $6.8 billion of shares in the $8 billion program funded by a deal in which it sold its half of Russian venture TNK-BP and took a 20 percent stake in OAO Rosneft , the country’s biggest oil producer.
BP still faces billions of dollars in fines from the Gulf spill under the U.S. Clean Water Act.
