BP still paying for Gulf of Mexico oil spill

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 dollar 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.

A total of 7 billion US dollars (£4.5 billion) had been paid to individual and business claimants, while federal, state and local government authorities had received 1.4 billion US dollars (£890 million) for claims and advances.

BP is facing a bid battle for its stake in TNK-BP, after Russia's state oil company Rosneft entered the fray just a week after TNK partner AAR confirmed it was interested in extending its stake.

Its plans to offload the TNK-BP stake follow a chequered history Russia. An attempt by BP and Rosneft to buy out AAR last year for about £20 billion - as part of an attempt to salvage their Arctic exploration tie-up - was blocked by AAR.

Shares in BP were down 3% after today's update was published.

PA