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BP slumps to £2.7 billion loss as oil prices continue to fall

Published 28/07/2015

BP's bill for the Deepwater Horizon oil spill disaster totals 54.6 billion US dollars (£35.1 billion)
BP's bill for the Deepwater Horizon oil spill disaster totals 54.6 billion US dollars (£35.1 billion)

Oil giant BP swung to a 4.2 billion US dollar (£2.7 billion) loss in the first six months of the year after taking another 9.8 billion dollar (£6.3 billion) hit from its Deepwater Horizon disaster and oil prices continued to plunge.

The group tumbled into the red after the additional charge for the 2010 Gulf of Mexico explosion and devastating oil spill left it nursing hefty losses in the second quarter of 6.3 billion dollars (£4 billion).

BP reached an 18.7 billion dollar (£12 billion) settlement in July with the US Department of Justice over the oil spill, which it said would settle all US federal, state and local claims - taking its total bill for the tragedy so far to 54.6 billion dollars (£35.1 billion).

Even with this charge stripped out, BP posted sharply lower half-year underlying replacement cost profits of 3.9 billion dollars (£2.5 billion) against 6.9 billion dollars (£4.4 billion) a year earlier as it suffered amid falling global oil prices.

BP's settlement in July was with federal authorities as well as the states of Alabama, Florida, Louisiana, Mississippi and Texas. It also covers more than 400 local g overnment bodies.

The group hopes the agreement resolves the largest legal claims for the explosion on the Deepwater Horizon oil rig in April 2010, which killed 11 workers, released millions of barrels of oil into the Gulf of Mexico and left BP on the brink of collapse.

But BP is still dealing with thousands of legal claims from small businesses and individuals affected by the spill.

The group is also battling against falling oil prices, with the cost of crude dropping to 62 US dollars (£40) a barrel on average in the second quarter from 110 dollars (£71) a barrel a year earlier, although this marked a slight rise on the 54 dollars (£35) a barrel seen during the first three months of the year.

Chief executive Bob Dudley said: "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."

Mr 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 70 billion US dollars (£45 billion) of assets, while he has also shrunk production.

The group revealed further charges relating to the restructuring of 270 million US dollars (£174 million) in the second quarter, bringing the total over the past three quarters to 920 million dollars (£592 million).

It now expects these costs to reach close to 1.5 billion US dollars (£965 million) over the full year.

BP's so-called downstream division - the part of the business that includes refineries and manufacturing as well as fuel marketing and global oil supply - reported a profit of 1.6 billion US dollars (£1 billion) in the second quarter, up from 933 million dollars (£600 million) a year earlier.

The firm 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 228 million US dollars (£147 million) from 4 billion dollars (2.6 billion) a year ago.

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