BP share price up, results beat projections on Rosneft stake

BP Plc reported on Tuesday performance that exceeded expectations, driven by gains on its stake in Russias Rosneft, despite $3.6 impairment charge and lower oil prices.

The company stated underlying replacement cost profit, excluding charges, of $2.2 billion for the three months ended December 31. In comparison BP reported a profit of $2.8 billion for the same period in 2013, while analysts had expected $1.5 billion in underlying earnings.

However, BP became the first large oil company to report a loss in the recent quarter amid plunging oil prices. The London-listed giant stated a replacement cost loss of $969 million for the last three months of 2014 compared to a profit of $1.51 billion a year earlier.

BP said the loss was due to a $3.6 billion post-tax net charge, mainly driven by impairments of the companys upstream assets, reflecting lower oil prices, revisions to reserves and other factors.

Performance was helped by BPs 19.75% stake in government-owned Rosneft, which contributed $451 million to underlying net income, lower than last years result of $1.1 billion, but above projections. Rosneft was expected to report a loss in the recent quarter, but the company managed to bring BP better results partly due to its change of treatment towards foreign currencies.

“It’s all about their ruble hedging,” a BP spokesman said. The Russian currency has experienced a large fall against the US dollar during recent months, but the newly adopted method erases Rosneft’s losses from unfavorable exchange rates.

BP also lifted its dividend from 9.75 cents to 10 cents a share, but said it would reduce spending this this year.

The oil giant joined the group of energy companies who have slashed their new projects funds and said its capital expenditure for 2015 would be around $20 billion. Previously BP was expecting the figure to stand somewhere between $24 billion and $26 billion.

The company said it would delay marginal projects in its upstream unit, while also putting on hold some hand-picked downstream projects. During 2014 BP spent $22.9 billion on new projects, also lower than the initial target.

The company said that four upstream projects are expected to come into production in 2015, including two in Angola and one each in Australia and Algeria. In the last quarter of 2014, two major projects began operations, one in the UK North Sea and one in Canada.

“Our focus must now be on resetting BP: managing and rebalancing our capital program and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations,” said Chief Executive Bob Dudley.

BP gained 3.12% on Monday and closed at GBX 437.70 in London. The stock gained 2.50% on Tuesday to trade at GBX 448.65 at 10:23 GMT, marking a one-year decrease of 5.24%. The company is valued at £79.97 billion.