BP Takes Nose Dive

BP's second-quarter profit slumped by nearly two thirds from last year as it grappled with lower oil prices, a write off in Libya and a $10.8 billion charge for the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

Expecting a prolonged period of lower crude prices, the British oil and gas company also cut its capital spending plans for this year for a second time to below $20 billion from $22.9 billion last year. (Norwegian rival Statoil announced has also spending cuts.)

BP's Chief Financial Officer Brian Gilvary said he expected oil prices, which fell on Tuesday to their lowest since February below $53 a barrel, to remain soft in the medium term because of a supply glut worldwide.

BP reached an $18.7 billion agreement with the U.S. government and five states earlier this month to resolve most claims from the oil spill five years ago, the largest corporate settlement in U.S. history.

While BP had been expected to take a $10 billion hit at some point, it also agreed to pay up to $1 billion to resolve claims from some local government bodies, taking cumulative pretax charges for the Deepwater Horizon rig explosion and spill that killed 11 workers to a massive $55 billion.

Profits were also hit by a $600 million exploration write off in Libya because of security issues. Overall, BP's underlying replacement cost profit, the company's definition of net income, came in at $1.3 billion, below analyst expectations of $1.64 billion and down from $3.6 billion a year earlier.

BP has already cut about 5,000 jobs this year from a total of 80,000 employees at the end of 2014.

Positive Signs

Despite the profit slump, BP shares rose 1.7 percent in London by 1248 GMT slightly outperforming a 1.3 percent gain for the European oil and gas sector index.

"Cost cutting is being delivered and capex is coming in lower than previous guidance which are positives, together with the fact that Macondo is now behind us," said an analyst at Bernstein, who have a "market perform" rating on the stock.

An Eye for Iran

Platts reports that BP will look for upstream opportunities in Iran once sanctions are lifted, but is unclear what Tehran's intentions are for its new oil contracts, BP's chief executive Bob Dudley said Tuesday.

Dudley added he was wary of rushing in before the sanction situation was clear.

"If the sanctions are relaxed in a way that allows us to go work there, obviously we would explore opportunities in Iran. We are not actively in that phase," Dudley said.

Once sanctions are lifted, Iran hopes to attract oil majors to help it develop its reserves of about 157 billion barrels of oil and 1,200 Tcf of gas.

Iran held initial talks with companies including BP, Shell, Total and Eni earlier this year.