Spill Bill Outweighs Rising Oil Prices At BP
by Parmy Olson
Oil giant returns to profit but takes another $7.7 billion hit related to Gulf of Mexico disaster.
LONDON — Oil and gas prices may be rising, but this is one year that BP will not noticeably benefit.
The British oil and gas giant said it took another $7.7 billion charge related to the cost of cleaning up this year’s Gulf of Mexico oil spill because of “higher spill response costs.” That meant that the company reported a net profit of $1.8 billion for the third quarter, well short of the $5.3 billion it earned last year, on sales of $74.7 billion
The result was still above analysts’ expectations for $882 million though, and BP‘s ( BP – news – people ) shares traded 1.4% higher in London on Tuesday, at 430 pence. BP had reported a loss of $17 billion in the second quarter and a profit of $7.4 billion a year earlier.
The company said that looking ahead, it expected a seasonal decline in refining margins in the fourth quarter, and that capital expenditure in 2011 would exceed the $18 billion it had previously indicated.
Pre-tax charges for the Gulf of Mexico spill also rose because of a delay in closing up the Macondo well, rising by around $2-3 billion and taking BP’s total costs booked for the spill response, future fines and compensation, to $40 billion.
BP was able to seal the exploratory well on Sept. 19, almost five months after it blew out on April 20, killing 11 employees and causing the worst environmental disaster in U.S. history.
BP has been selling off assets to help it pay for the cleanup costs and avoid getting taken over by a competitor like Exxon Mobil ( XOM – news – people ). Earlier this week BP said it would raise $650 million by selling four fields in the Gulf of Mexico to the oil and gas unit of Japan’s Marubeni ( MARUY.PK – news – people ). (See “BP Sells More Assets To Pad Spill Payback Fund.”)
Last week BP also sold assets in Venezuela and Vietnam to its Russian joint venture, TNK-BP, for $1.8 billion.The British company wants to raise $25-30 billion by the end of 2011.
“These results demonstrate that BP is well on track for recovery after the tragic accident on the Deepwater Horizon drilling rig and subsequent oil spill,” said BP’s recently-installed Chief Executive Robert Dudley. Read more.