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Oil and Russia hit BP profits

Tuesday, October 28, 2014 - 01:46

Oil major BP increases dividends in the third quarter as it sees a jump in operating cash flow. As Amy Pollock reports that's despite lower oil prices and a steep drop in contributions from Russia where a depreciating rouble hits its income.

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BP is a major investor in Russia. But it's 20 percent stake in state-owned Rosneft is causing problems for the oil major. Western sanctions over Ukraine against the world's biggest oil producer have cut Rosneft off from foreign lending. The falling rouble hasn't helped - the Russian currency has lost more than a fifth of its value since the start of the year. Bank of New York Mellon's Simon Derrick says that's bad news for all oil companies. (SOUNDBITE) (English) CHIEF CURRENCY STRATEGIST AT BNY MELLON, SIMON DERRICK, SAYING: "As we continue to see the dollar rally, that will help put downward pressure on oil prices and therefore I think it will continue to be a struggle not only for oil companies, but also oil-related currencies." Underlying net income from Rosneft for the third quarter was 110 million dollars, a fraction of the 808 million dollars a year earlier. Oil prices are at a four-year low of near $85 a barrel as Chinese demand slows and supplies remain ample. It's wiped billions from oil companies' stock prices, with a knock-on effect in equity markets. Barclays' Will Hobbs: (SOUNDBITE) (English) CHIEF EQUITY STRATEGIST AT BARCLAYS WEALTH, WILL HOBBS, SAYING: "If you look at the performance from peak to recent trough in terms of equity markets around the world, energy companies contributed an outsize portion to that downfall thanks to declining oil revenue." But the picture is not all bad for BP. Profits were broadly in line with expectations at 3 billion dollars and its dividend is to rise 5.3 percent. The company looks on track to generate $30 billion of net cash flow in 2014, after selling assets and reducing costs following the Gulf of Mexico oil spill. And apart from its Rosneft stake BP has no other exposure to Russia, unlike rivals ExxonMobil, Shell and Total.

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Oil and Russia hit BP profits

Tuesday, October 28, 2014 - 01:46