Financial Risk Management at BP

On July 29, 2014, BP p.l.c. (BP) announced its second quarter results. The company reported a 34% jump in underlying replacement cost profit compared to the same quarter of the previous year (Refer to Exhibit I for second quarter summary). This was largely due to improved upstream production in high margin areas – mainly in the Gulf of Mexico – strong oil and gas realizations, and stronger contributions from Rosneft . Bob Dudley, the first American Chief Executive Officer (CEO) of the BP group, said, “This was another successful quarter, delivering both operational progress and robust cash flow.

However, the company warned the investors about the potential negative impact on business if the European Union and the United States imposed economic sanctions on Russia. According to the company, “This could (economic sanctions) have a material adverse impact on our relationship with and investment in Rosneft, our business and strategic objectives in Russia, and our financial position and results of operations.....