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* BP could sign off on three more projects this year -CEO
* Q2 earnings $120 mln below analysts' expectations
* Close to drawing a line under Deepwater Horizonliabilities (Recasts, add CEO comment, new projects, context, updates shareprice)
By Karolin Schaps
LONDON, July 26 (Reuters) - BP will forge ahead withat least three more new projects this year, its CEO said,despite the British oil major reporting a 45 percent drop insecond-quarter earnings that prompted a cut in its 2016investment budget to below $17 billion.
Tuesday's results missed expectations, with analystssurprised by higher corporate charges, including administrativecosts relating to Gulf of Mexico oil spill liabilities, and alower contribution from BP's stake in Russian oil producerRosneft.
Rivals Shell, Statoil, Total andEni also report second-quarter numbers this week,sharpening the focus on Tuesday's drop in crude oil pricestowards $44 a barrel, well short of the $60 previously cited asthe level at which oil majors can break even.
Though BP chief Bob Dudley acknowledged that the global oilglut's impact on refining margins and revenue continues to makefor a challenging environment, he said that capital expenditureplans have been helped by a drop in associated costs.
"We're going to choose our projects really carefully and thecost reductions and re-engineering of the projects has reallybrought them down to what I think is a very attractive (pricerange)," Dudley told Reuters.
Dudley said that BP could make another three finalinvestment decisions this year, having already signed off on theexpansion of its Tangguh liquefied natural gas (LNG) plant inIndonesia and the Atoll offshore gas project in Egypt.
PROJECTS EARMARKED
A gas project in India, the second phase of the Mad Dogdeepwater oil field in the Gulf of Mexico and a Trinidad projectcould all get the green light, he said.
BP's projects pipeline is expected to add 500,000 barrels ofoil equivalent a day by the end of 2017, with a further 300,000bpd by the end of the decade.
Shares in the company fell 2.5 percent to 429 pence by 1128GMT, but RBC Capital Markets analyst Biraj Borkhataria said: "Wethink continued cost and capex deflation reads positively forthe sector."
Second-quarter underlying replacement cost profit, BP'smost-watched profit measure, was $720 million, down from $1.3billion in the same period last year and $120 million below ananalyst consensus provided by the company.
BP's refining margins hit a six-year low for the secondquarter and the company said they would remain under significantpressure in the coming months.
It continues to reduce costs and now expects full-yearcapital expenditure to come in below the previous target of $17billion target, saying that its 2017 investments could drop toas low as $15 billion if crude prices remain weak.
"I don't think BP should go below that because then youstart to take away from important growth," Dudley said.
Total costs for the 2010 Deepwater Horizon explosion and oilspill, which killed 11 workers, has reached $62 billion but themajority of claims have now been settled.
BP maintained its quarterly dividend at 10 cents a share,reassuring investors in a sector valued for its consistentpayouts.
(Editing by David Goodman)
