BP plc, the UK oil company with the single-biggest foreign investment in Russia, warned that more sanctions against the country could hurt its business.
BP, with a 20 percent stake in OAO Rosneft, stands to lose the most from further sanctions in response to the country’s annexation of Crimea. The European Union and the US may act soon to intensify punitive measures aimed at key sectors of the economy – finance, defence and energy.
“Any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation,” BP said in an earnings statement.
BP reported profit rose 34 percent in the second quarter, beating analyst estimates, including $1 billion underlying net income from Rosneft. That compares with $218 million from the Russian company a year earlier.
“To date, these sanctions have had no material adverse impact on BP or Ruhr Oel GmbH,” a joint refining venture between BP and Rosneft, it said. “However, BP will continue to keep this under review.”
A Dutch court ruled yesterday in favour of former Yukos Oil Co. officials, ordering Russia to pay $50 billion for seizing what was once the country’s largest oil producer.
The decision risks dragging Rosneft and natural gas exporter OAO Gazprom into extended legal wrangling. The state-run companies may be targeted because they were beneficiaries of expropriated Yukos assets.
Earnings adjusted for one-time items and inventory changes rose to $3.6 billion from $2.7 billion a year earlier, the London-based company said in the statement. That beat the $3.4 billion average estimate of 13 analysts in a Bloomberg News survey. The quarterly dividend was unchanged from the previous three months at 9.75 cents a share.
While total energy production declined due to disposals, the company brought online projects with better returns, it said. US output rose 28 percent in the quarter from a year earlier, boosted by new assets in the Gulf of Mexico.
“We are continuing to ramp up the major new projects that drive delivery of cash flow and are also now seeing benefits from our focus on operating with greater reliability and efficiency,” CEO Bob Dudley said in a statement. “This was another successful quarter, delivering both operational progress and robust cash flow.”
