BP profits hit by refining weakness, asset sell-off

Provisions to cover Gulf of Mexico spill clean-up, compensation and legal costs climbed to $42.7bn
  • @BawdenTom

BP’s shares fell in early trading after revealing a further $200 million (£122 million) charge relating to the Gulf of Mexico oil spill and announcing its fourth-quarter profits had dived 28 per cent.

The $200 million charge reflected rises in legal and Gulf Coast restoration costs and brings BP’s total bill for the spill so far to $42.7 billion, although it admits the final amount could be far higher because it does not account for further potential economic loss claims.

Furthermore, BP has not accounted for the possibility that the US courts find the group’s behaviour in relation to the oil spill to have been grossly negligent, a ruling that could add more than $20 billion to its costs.

BP said about $19.3 billion of its  $20 billion trust fund to settle  claims was now accounted for, leaving it with “around $700 million of unallocated headroom”.

The increase in spill-related provisions reminded investors that the costs of the accident could well be far from over, pushing down its shares by 6.75p, or 1.5 per cent, to 466.85p.

Although it avoided the profit warnings recently issued by rivals Shell and Chevron, BP said its profits tumbled to $2.8 billion in the fourth quarter, from $3.9 billion a year earlier.

Weak profit margins on its refining business helped push profits from its “downstream” unit down from $1.4 billion to just $70 million.

Full-year profits fell 22 per cent to $13.4 billion. However, BP said 2013 was one of the most successful years for exploration drilling for almost a decade, making seven discoveries.

BP chief executive Bob Dudley put a brave face on the results and stressed the importance of keeping a tight control on spending. “Capital discipline is central to BP’s strategy,” he said..