The oil crash is costing BP billions

Oil major BP beat profit expectations for the fourth quarter of 2014 on Tuesday while taking a $US3.6 billion impairment charge and cutting capital expenditures due to low oil prices.

The firm reported underlying replacement cost profit at $US2.2 billion versus expectations of $US1.5 billion.

BP said it took a $US3.6 billion post-tax net charge mainly relating to impairments of upstream assets in the North Sea and Angola due to lower oil prices and resulting in a fourth quarter replacement cost loss of $US969 million.

The company said it would cut capex to $US20 billion in 2015 from $US22.9 billion in 2014. It maintained its quarterly dividend at 10 cents per ordinary share.

“We have now entered a new and challenging phase of low oil prices through the near and medium term,” said Bob Dudley, BP’s chief executive. “Our focus must now be on resetting BP.”

BP said its stake of just under 20 per cent in Russian state oil major Rosneft generated a profit $US470 million, down from $US1.1 billion in the same quarter a year ago but up from just $US110 million in the third quarter. It added the figures were based on provisional numbers and could change.

BP’s peers, including Chevron and Royal Dutch Shell, have responded to the drop in oil prices by around 60 per cent since June by cutting spending over the next few years.

Shell said it would trim its planned investments by $US15 billion over the next three years but warned against “overreacting” to the declines. Chevron executives slashed the company’s 2015 capital budget by 13 per cent to $US35 billion.

BP has sold $US40 billion of assets since the 2010 Gulf of Mexico spill and announced an additional $US10 billion disposal by 2015.

BP said production for full year 2015 is expected to be higher than 2014 despite plans to reduce exploration expenditure and postpone marginal projects.

BP’s net debt at the end of 2014 was $US22.6 billion and the debt-to-capitalisation ratio 16.7 per cent, slightly above the 16.2 per cent ratio a year earlier.

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This article originally appeared at Reuters. Copyright 2015. Follow Reuters on Twitter.

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