BP still feeling heat from Gulf explosion as profits plunge

Nearly three years on, the Gulf of Mexico oil spill continues to dominate BP’s agenda.

The FTSE 100 oil giant today announced a 19% drop in its 2012 profits to $17.6 billion (£11.2 billion) as it took a further $4.1 billion charge in the fourth quarter relating to the explosion on the Horizon rig in April 2010.

The blast resulted in 11 deaths and spilled an estimated five million barrels of oil into the Gulf.

The charge dealt a further blow to BP’s bottom line, which was already suffering from a decline in production after the company sold a wide range of businesses to finance compensation claims.

These include BP’s 50% stake in its troubled Russian oil joint venture TNK-BP to Rosneft for $28 billion in cash and shares and the Carson oil refinery in California.

BP said it had divested $37.8 billion of businesses since 2010, excluding the TNK-BP deal, which is expected to be formally completed in the first half of the year.

It has taken a cumulative net charge for the Gulf of Mexico of $42.2 billion, with the latest charge mostly related  to a recent out-of-court settlement that resolves all federal criminal charges stemming from the incident.

BP chief executive Bob Dudley sought to draw a line under the incident today, acknowledging that times have been tough lately but insisting that the company was in good shape.

“We have moved past many milestones in 2012, repositioning BP through divestments and bringing on new projects. This lays a solid foundation for growth into the long term,” he said.

BP is preparing to face its biggest case over the spill this month.

If it goes ahead, the case will determine how much oil was spilt, who is to blame for the incident and whether BP was negligent or grossly negligent. If BP is found to have been negligent, it could be liable for a maximum penalty of $4.5 billion from the Clean Water act alone. If grossly negligent, that could soar to $21 billion.

Fourth-quarter profits fell by a fifth to $4 billion. There is a 10% rise in the full-year dividend to 16.67p a share.