BP into the red as costs mount from Deepwater

BP is still counting the cost of the 2010 Deepwater Horizon disaster. Picture: Getty

The latest charge, including $9.8bn linked to government settlements and other costs for claims from small businesses, means BP has now racked up a $54.6bn bill following the Gulf of Mexico catastrophe, in which 11 workers were killed.

Earlier this month, BP agreed to pay up to $18.7bn, to be spread over 18 years, to settle all US federal, state and local claims from the 2010 tragedy, in which millions of barrel of oil were released into the Gulf.

As a result, the group reported a loss of $3.2bn for the six months to the end of June, compared with a $6.9bn profit for the same period a year earlier.

Even with this charge stripped out, the BP saw its underlying profits slide by more than 43 per cent to $3.9bn as it suffered amid falling global oil prices. During the second quarter, Brent crude averaged $62 a barrel – up from $54 in the first three months but well below the $110 seen a year ago.

Chief executive Bob Dudley said: “The external environment remains challenging, but BP moved quickly in response and we continue to do so. Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the group and we continue with capital discipline and divestments.

“In the past few weeks oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future.”

Dudley, who took over from Tony Hayward in the wake of the Gulf of Mexico crisis, has been leading a major overhaul to shore up the group, slashing jobs and selling more than $70bn of assets, while he has also shrunk production.

The group revealed further charges relating to the restructuring of $270 million in the second quarter, bringing the total over the past three quarters to $920m. It now expects the total cost of its overhaul to swell to almost $1.5bn for the full year.

BP’s downstream arm, which includes refineries and manufacturing as well as fuel marketing and global oil supply, reported a profit of $1.6bn in the second quarter, up from $933m a year earlier, but the group cautioned that “looking forward to the third quarter, we expect reduced refining margins and lower levels of turnaround activity”.

The group’s upstream business – which includes oil and natural gas field development, production, storage and processing – saw profits in the second quarter tumble to $228m, down from $4bn a year ago, as it counted the cost of higher exploration write-offs.