Rosneft accounting move helps BP beat profit forecast

LONDON (Reuters) - A surprise contribution from its stake in Russian oil giant Rosneft helped BP (BP..LO) beat profit forecasts for the fourth quarter of 2014, while the energy major also cut spending by 13 percent to weather lower oil prices.

The plunge in oil prices was also reflected in a $3.6 billion impairment charge relating to assets in the North Sea and Angola. Fellow British energy company BG Group Plc also wrote down the value of its business by almost $6 billion on Tuesday.

BP reported underlying replacement cost profit at $2.2 billion versus expectations of $1.5 billion. BP's shares were up two percent at 1000 GMT, paring earlier larger gains and trading in line with the broader European oil and gas sector which was supported by a recent rebound in oil prices .

The upbeat result was explained in large part by an unexpected profit of $470 million from Rosneft, hard hit by Western sanctions over Moscow's role in Ukraine as well as the falling oil prices.

BP's profit from the 19.75 percent Rosneft stake was due to a change in the Russian firm's foreign exchange accounting system. It was based on provisional numbers and could change.

Several analysts had expected BP to report a fourth quarter loss of up to $750 million from its stake in Rosneft.

"Rosneft's contribution did not reflect FX losses on its borrowings and were hence higher than the headline consensus forecast," said analysts at Morgan Stanley.

Rosneft accounts for around one third of BP's oil production at just above 1 million barrels of oil equivalent per day and around nine percent of its profits in 2014.

RESETTING BP

BP followed its rivals with a string of budget cuts and asset writedowns as a result of the halving of oil prices since July to around $55 a barrel.

"We have now entered a new and challenging phase of low oil prices through the near and medium term," said chief executive Bob Dudley said. "Our focus must now be on resetting BP."

BP had already announced a $1 billion restructuring plan that will include thousands of lay-offs on which it had already spent $433 million. It has also imposed a company-wide pay freeze.

While several peers slashed 2015 spending plans to tackle lower oil prices, Royal Dutch Shell warned against "overreacting" to the declines.

BP said it would cut its investment budget to $20 billion in 2015 from $22.9 billion in 2014. It maintained its quarterly dividend at 10 cents per ordinary share.

"Compared to peers, we believe BP has offered one of the most responsive outlooks to the lower near-term crude environment," Jefferies analyst Jason Gamel said.

The impairment charge for upstream assets resulted in a total fourth quarter replacement cost loss of $969 million.

BP has sold $40 billion of assets since the 2010 Gulf of Mexico spill and announced an additional $10 billion of disposals by the end of 2015, of which $4.7 billion have been already agreed.

(Reporting by Dmitry Zhdannikov; editing by Jason Neely and Keith Weir)