LONDON • BP said second-quarter profit tumbled 64 per cent as crude prices slumped.
Profit adjusted for one-time items and inventory changes dropped to US$1.3 billion (S$1.8 billion) from US$3.6 billion a year earlier, the London-based company said yesterday in a statement.
Chief executive Bob Dudley is Europe's third-biggest oil producer to brace itself for a longer period of low prices by slashing spending, reviewing projects and selling assets.
Brent crude, a benchmark for more than half the world's oil, has dropped about 50 per cent in the past year. That has eroded value and forced companies to reduce investment in high-cost projects.
It has also put investors on guard for a steep decline in profitability. Royal Dutch Shell, Total SA, ExxonMobil Corp and Chevron Corp are all scheduled to report second-quarter earnings this week. Still, lower prices are making it cheaper for refineries to buy their basic raw material - crude oil. With petrol and diesel prices falling less than crude, processing plants can earn higher margins.
BP has dropped 5.8 per cent this year in London trading. The stock declined in four of the past five years after an oil spill in the Gulf of Mexico in 2010 led to a US$10.8 billion charge related to the spill.
In a sign it was hunkering down for an extended period of lower oil prices, the British oil and gas company also cut its planned full-year capital spending again to "below US$20 billion", after cutting it 13 per cent to US$20 billion earlier this year.
Profits were also hit by a US$600 million exploration write-off in Libya as a result of security issues, leaving underlying replacement cost profit, BP's definition of net income, at US$1.3 billion, below analysts' expectations of US$1.64 billion.
"BP's earnings were weak as second-quarter production was weaker than we had expected, but the market will take the (capital spending) cut positively," said Mr Anish Kapadia, analyst at investment bank Tudor, Pickering Holt and Co.