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BP reports losses in Alaska, elsewhere

Suspension of the Liberty Field project off Alaska part of $5 billion in write-downs

Posted: August 1, 2012 - 12:00am

Key Alaska oil producer BP reported slightly declining revenues in Alaska, but vanishing profits, as the company ended work on an a costly offshore oil field.

BP Exploration (Alaska) the subsidiary of the huge multi-national oil company BP, reported Tuesday that it lost $508 million in the first half of the year, compared to a profit of $782 million last year.

The suspension of the Liberty project, with which BP would have used extended-reach drilling to tap into offshore oil reserves, played a significant role in the company’s overall loss for the quarter, it said Tuesday.

Alaska Sen. Bill Wielechowski, D-Anchorage, said he’s confident that BP’s core Alaska operation in Prudhoe Bay remains profitable. Fellow Prudhoe Bay owner ConocoPhillips Co. reported a billion dollars in profit for Alaska last week, he said.

“Historically they pretty much track together, and when (legislative) consultants looked at Prudhoe Bay’s net present value and internal rates of return, they were through the roof,” he said.

Even without about $5 billion in charges, including the Liberty suspension, BP’s earnings would have been down for the quarter, but the one-time charges caused a loss of more than $1.3 billion for the quarter, on total revenues of about $93.3 billion. The company though said that gains on inventory holdings left it with a slim profit of $238 million.

“We recognize this was a weak earnings quarter, driven by a combination of factors affecting both the sector and PB specifically, said Bob Dudley, BP group chief executive, in a statement accompanying the company’s earnings announcement.

BP’s stock fell 4.6 percent on the news Tuesday, to $39.90 a share.

Among other write-downs elsewhere were BP’s investments in shale gas in the Lower 48, where big investments have been plagued by low natural gas prices.

BP’s Alaska subsidiary reported revenues down slightly, with sales and other operating revenues in the first half of 2012 amounting to $2.88 billion, compared to $3.1 billion in 2011.

The price for Alaska North Slope crude oil this year amounted to $114.12 a barrel, compared to $109.29 a barrel in the first half of 2011.

BP said that its overall production of oil and gas declined 7.5 percent for the year, but did not provide specifics for Alaska.

BP’s Alaska public relations person did not return phone calls Tuesday, but the company financial filings with the Securities and Exchange Commission appeared to show profitable operations in Alaska, other than the Liberty costs.

The company listed asset impairment charges in Alaska of $957 million, presumably the ending of the Liberty project.

Production and similar taxes amounted to $741 million for the year. That includes Alaska’s oil severance tax known as Alaska’s Clear and Equitable Share, or ACES,

Last year the state’s production tax was $898 million for the first half of the year.

At the same time, production and manufacturing expenses, which can be deducted from Alaska taxes, increased $140 million to $680 million in the first half of 2012.

Linked to the reported loss in Alaska, BP-Alaska reported negative taxation of $31 million for the first half of the year, compared to a tax bill of $349 million in the same six months last year.

The BP Exploration (Alaska) results include some minor operations out side Alaska, and are not a complete reflection of the company’s operations in the state, it said. Also, BP reports separately its ownership of about half of the trans-Alaska oil pipeline.

Despite the reported loss in Alaska, Wielechowski said it appeared that BP’s Prudhoe Bay oilfield was still quite profitable for the company.

“I have no doubt they are making extremely high profits in Alaska,” he said.

He said the Liberty field would have been an important addition to the Alaska oil patch, though as it is in federal waters offshore it would not pay Alaska severance taxes.

The Liberty project would have provided valuable jobs and added flow to the trans-Alaska pipeline,” he said.

Wielechowski also said Alaska should require that its big oil producers, including BP, Conoco, and Exxon Mobil Co., make public more information about what their Alaska profits are and how they are calculated.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com

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