BP Operational Earnings Fall On Higher Tax and Costs, Lower Oil Price

    By Selina Williams

    BP PLC (BP.LN) Tuesday posted a rise in profit for the second quarter, thanks largely to the absence of some $3 billion in write-downs it took a year ago. Stripping out these one-off losses, the company said its profit from operations declined due to a combination of higher taxes and costs, and lower oil prices.

    The U.K.-listed oil company also increased its estimate for the cost of a disputed claims-settlement process related to the 2010 Deepwater Horizon oil spill by $1.4 billion to $9.6 billion, reflecting additional claims received and processed.

    BP continues to challenge the legitimacy of a legal process that it says it paying compensation to businesses in the Gulf area that is far too high, or in some cases unjustified. The company raised the total amount of money it has set aside to pay costs related to the oil spill in the Gulf of Mexico to $42.4 billion, from $42.2 billion previously.

    The London-based oil and gas giant said its replacement cost profit, a figure that excludes gains or losses in the value of inventories and is therefore equivalent to the net profit figure reported by U.S. oil companies, was $2.4 billion in the three months ended June 30, compared with $104 million in the second quarter of 2012.

    Earnings a year ago were sharply reduced by write-downs on the value of oil fields and refineries in the U.S. Stripping out these one-off losses, the company's second quarter 2013 profit was $2.71 billion, down 24% on the year and significantly below average analysts' expectations of $3.40 billion.

    BP said earnings fell due to a higher tax rate, lower oil prices, higher costs and lower post-tax income from Russia due to currency effects.

    The company's total oil and gas production was 2.241 million barrels of oil equivalent per day, a 1.5% decrease on the year mostly due to asset sales. This was above analyst expectations of 2.165 million barrels of oil equivalent a day.

    Group revenues were $94.71 billion, compared with $94.98 billion in the second quarter of 2012.

    BP announced a quarterly dividend of 9 cents per ordinary share, or 54 cents per American depositary share, to be paid Sept. 20.

    BP shares still lag behind their sector peers over three years after the 2010 Deepwater Horizon disaster. Many investors are still wary of buying into the firm until the precise size of billions of dollars in potential environmental fines becomes clearer.

    Write to Selina Williams at selina.williams@wsj.com