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BP still paying for spill disaster
8:36am Tuesday 31st July 2012 in Business Daily
© Press Association 2011
THE Gulf of Mexico oil spill continues to plague BP more than two years after the disaster as the energy giant has revealed another 847 million US dollar (£538 million) hit to cover rising legal costs.
The additional charge for the second quarter brings the total bill for the fatal Deepwater Horizon incident to 38 billion US dollars (£24.1 billion), BP said.
BP is struggling to shake off the reputational blow of the April 2010 Macondo blow-out after recently coming under further fire in a report from a US government safety panel.
And the underlying picture at BP is not much brighter, as the company revealed a 24% slide in underlying replacement cost profit to 8.5 billion US dollars (£5.4 billion) in the first half of the year as oil prices fell and maintenance work disrupted production.
BP group chief executive Bob Dudley said: "We recognise this was a weak earnings quarter, driven by a combination of factors affecting both the sector and BP specifically."
The group's production also continues to suffer from the drilling ban imposed on it in the wake of the Gulf of Mexico spill, while it is also ramping up asset disposals under a programme to sell 38 billion dollars (£24.4 billion) of assets by 2013. It has entered into agreements to sell assets with a value of 24 billion US dollars (£15.3 billion) since 2010.
BP's production of oil and gas, excluding results from its Russian joint venture TNK-BP, averaged 2.27 million barrels of oil per day in the second quarter, compared with 2.46 million for the same period last year, a slide of 7%. Furthermore, the oil giant warned that production is expected to slide lower in the third quarter, between July and September, before returning to growth in the final three months of 2012.
The group also took a 4.8 billion US dollar (£3.1 billion) hit for writing down the value of a series of assets including US shale gas assets and its decision to suspend the Liberty project in Alaska - an offshore oil field with about 100 million barrels of recoverable oil.
BP set up a 20 billion US dollar (£12.7 billion) trust to cover the costs of claims for the Deepwater Horizon incident, which is included within the 38 billion US dollars provision. BP had paid a total of nearly 8.8 billion US dollars (£5.6 billion) as at June 30 for individual, business and government claims, including payments made by BP prior to the establishment of the trust.
Shares in BP were down 3% after the update was published.