By Andrew Callus
LONDON (Reuters) - BP Plc
The British oil company, struggling under the weight of litigation over the 2010 U.S. Gulf oil spill and a row with its Russian partners, said both oil production and refining margins fell in the second quarter and would fall again in the third.
Analyst Richard Griffiths of Oriel Securities said the figures were "testing the faith" of investors and on a divisional basis "missed (expectations) at every level".
Shares in western Europe's second-largest oil company were down 4.5 percent at 424 pence at 7:35 a.m. EDT (1135 GMT), by far the biggest faller of the day among European oil stocks <.SXEP>.
The $5 billion charge included $2.7 billion for the declining value of U.S. refineries and a $2.1 billion two-part writedown of U.S. shale gas assets, which have been hit by a slump in prices, and to take account of suspension of the Liberty project in Alaska.
BP abandoned Liberty earlier in July, saying the field looked likely to cost more than the $1.5 billion it had planned to spend there.
The shale gas and refinery writedowns are no surprise. Others have being doing the same amid weak fuel manufacturing margins and with U.S. gas prices near 10-year lows, below cost for some operators of shale fields.
Shale technology using underground "fracking" explosions and horizontal drilling is wringing gas from reserves previously thought unrecoverable, but its relatively high cost has made it a victim of its own success as a glut develops in the United States.
But BP also booked an extra $847 million provision for the 2010 U.S. Gulf oil spill, bringing the total set aside for the disaster to $38 billion, or well over two years' worth of profits at current prices.
Investors are hoping for a deal with U.S. authorities before the U.S. elections, but BP warned there was still "significant uncertainty" with regard to its potential obligations there.
BP is also in dispute with the co-owners of TNK-BP, who on Monday blocked the payment of dividends from the business that provides 29 percent of BP's output, and it knows it will not be forgiven any other hiccups while those problems weigh on its share price.
"Until we are able to resolve one or both of those issues we will continue to have a higher level of uncertainty over the company," Chief Executive Bob Dudley told reporters after the results.
Even before Tuesday's slide, BP shares traded at just 6.9 times forecast earnings, compared with an average of 10.3 times for the 30 companies in the Dow Jones Global Titans <.DJTENG> index, and well below the ratio commanded by industry number one ExxonMobil at 11.5.
Charges tipped BP into a loss for the quarter of $1.4 billion. Adjusted for the charge and other one-offs, profits on a replacement cost basis were $3.7 billion, down from $5.7 billion a year ago and below expectations of around $4.4 billion.
Analysts said an unexpectedly large loss of output as a result of maintenance in the high-profit offshore U.S. Gulf - a problem that also hit rival Royal Dutch/Shell
They had also underestimated the impact of a tax lag on Russian production, which affected the profits of BP's Russian joint venture, TNK-BP
The company said it still sees a "significant uncertainty" over U.S. oil spill obligations but that it was in "advanced talks" to sell Texas City and Carson, the two U.S. refineries it has earmarked for disposal, and would get them off the books by the end of 2012 as planned.
(Editing by Janet McBride and Will Waterman)