BP posts $6 billion loss in Q2

Jul 28, 2015 12:00 AM

LOW OIL PRICES, DEEPWATER HORIZON DEAL HIT BP

BP earlier this month reached a settlement with five states over legal claims relating to the 2010 Deepwater Horizon oil rig disaster (pictured)  in the Gulf of Mexico. Although the agreement will give the company more room to maneuver, the weak oil price will keep the pressure on.

BP PLC swung to a loss in the second quarter, a victim of lower oil prices and a $9.8 billion pretax charge relating to the deal it reached earlier this month to settle U.S. claims over the 2010 Deepwater Horizon disaster, The Wall Street Journal’s Sarah Kent reports. Also, bets on Libya and Russia failed to pay off. BP’s replacement cost loss, similar to net income reported by U.S. oil companies, was $6.27 billion as compared with a profit of $3.18 billion a year earlier.

BP’s oil-trading results also declined, the Financial Times reports.

The loss comes even though  the oil giant has cut spending by freezing pay, selling assets and delaying projects with reserves of over 3.5 billion barrels of oil and gas, which is more, according to Wood Mackenzie, than any other big independent energy company.

One bright spot for BP was its refining arm, which gained from the low oil prices. Pretax earnings increased to $1.6 billion from $933 million a year earlier for BP’s downstream business, which includes refining and marketing.

Still, investors want to know how BP plans to move forward from the Deepwater Horizon incident, now that the settlement has given the oil giant some breathing room. “We’re entering into a period where the company needs to decide what it’s going to be,” said Paul Mumford, an investment manager at Cavendish Asset Management Ltd.

OIL COMPANIES AMONG CASUALTIES AS CHINA STOCKS PLUNGE

Chinese shares suffered their biggest one-day percentage drop in over eight years on Monday, and oil companies were among the hardest hit, teh Journal’s Lingling Wei and Chao Deng report. The Shanghai Composite Index, which includes China’s biggest companies, fell 8.5% as investors have become skeptical of the market and the government’s ability to control its slide.

China’s biggest industries are the largely state-owned financial, energy and mining sectors, and China Petroleum & Chemical Corp. was among stocks falling by the 10% daily limit. China shares fell for a third straight day on Tuesday.

HONEYWELL PAYS $5.1 BILLION FOR ELSTER

Honeywell International Inc. agreed to buy German-based energy and water business Elster Group GmbH from the U.K.’s Melrose Industries PLC for £3.3 billion ($5.1 billion) in cash, the Journal’s Alex MacDonald reports. Elster Group includes Elster Gas, Elster Electricity and Elster Water and is a leading provider of gas, electricity and water meters.

MARKETS

Oil prices fell on Tuesday, touching a four-month low as a rout in Chinese stock markets added to the already bearish investor sentiment. China’s shares fell for a third straight day on Tuesday in a second wave of heavy selling this month. The selloff is seen as a symptom of a wider economic malaise which could depress demand from the world’s second biggest consumers of crude oil.

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