British energy giant BP recorded multi-billion dollar losses in the second quarter due to payments linked to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Low oil prices also weighed on results.
The loss was “mainly relating to the recently announced agreements in principle to settle claims arising from the 2010 Deepwater Horizon accident,” said Bob Dudley, BP’s chief executive.
For the second quarter, BP had set aside $10.8 billion (9.8 billion euros) to cover the cost of the Deepwater Horizon accident, leading to a net loss of $5.82 billion, the London-based company reported. That compared to a net profit of $3.4 billion one year prior.
It was BP’s first quarterly earnings report since the company announced a deal that will provide a further $18.7 billion to five US states affected by the 2010 accident, which killed 11 workers and spewed millions of gallons of crude oil into the Gulf of Mexico.
BP said the settlement would bring its full obligations to $54.6 billion.
Low oil price and uncertainty
Besides dealing with the weight of the Deepwater Horizon disaster, BP, like other oil giant, is struggling to deal with a plunge in global oil prices.
The price of Brent crude, an international variety of oil, averaged $62 a barrel in the second quarter, compared to $110 a barrel in the same quarter a year earlier.
“In the past few weeks oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran,” Dudley said. “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 the0000 future.”
Dudley said the company is responding by increasing efficiency and continuing “with capital discipline and divestments.”
Uncertainty in the Middle East has also had an impact. In Libya, BP reported exploration write-downs and other costs totaling $598 million. This includes a $432 million write-off because there is “significant uncertainty on when drilling operations might be able to proceed.”
S&P affirms ratings
Ratings agency Standard & Poor’s said BP’s Deepwater Horizon settlement and its cost reduction efforts should support its credit ratios to the end of next year. S&P affirmed its “A-1” rating on BP’s short-term credit and “A” on its long-term debt.
An “A” rating considers a company’s ability to meet financial commitments as strong, but leaves room for adverse events or changes in economic conditions.
S&P said BP’s $18.7 billion settlement of federal, state and local claims stemming from the Deepwater Horizon accident in 2010 reduces the uncertainty around the upper limit of possible claims.
bea/cjc (dpa, AFP, Reuters)