BP's Gulf of Mexico disaster fund is scraping the barrel
Shares in BP tumbled nearly 4 per cent today after the FTSE 100 oil giant hiked its provision for compensation claims from the Gulf of Mexico oil spill by $1.4 billion (£913 million) to $9.6 billion — and warned the final cost could be “significantly higher” as it continues to receive new claims.
It also said the $20 billion trust fund set up to cover losses by businesses in the region now only has $300 million remaining.
The company has unsuccessfully attempted to freeze compensation payments being made under the settlement it agreed last year with private sector plaintiffs over the Gulf of Mexico oil spill in 2010, which resulted in 11 deaths. It says that the office of Patrick Juneau, the claims administrator, has interpreted the settlement in a way that opens the door to “absurd” payments to people not affected by the spill.
BP is continuing to challenge Mr Juneau’s interpretation but warned that, even if it succeeds, the total cost of the settlement would be “significantly higher” than $9.6 billion because that figure does not reflect business economic claims not yet received or processed.
BP revealed the rising compensation costs alongside a disappointing 25 per cent dive in its underlying second quarter profit, excluding exceptional items, to $2.7 billion, well below forecasts of $3.4 billion.
A lower oil price — which traded 5 per cent below the same period a year earlier — plus higher taxes and a reduced contribution from its Russian operation all hit its bottom line.
BP reported a $218 million profit contribution from its 20 per cent stake in Russia’s Rosneft, which the company acquired as part of the cash-and-shares sale of its TNK-BP joint venture in Russia in March.
But the Rosneft contribution was well below the $452 million payout BP received from the TNK-BP take last year, when it still owned half the business.
Including exceptional items, BP’s second-quarter profits rebounded from $104 million to $2.4 billion in the second quarter, after BP made billions of dollars of writedowns this time last year.
The $1.4 billion rise in compensation costs pushed up the net charge for spill to $42.2 billion at the end of the second quarter, when other costs such as the clean-up are included.
BP chief executive Bob Dudley said: “We are seeing growth in production from new high-margin projects and are making good progress in exploration and delivery.”
BP’s shares fell by 18.05p, or 3.86 per cent, to 449.45p.
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