BP back in black with a bang

Wednesday, February 08, 2012

LONDON, England — BP returned to profit with a bang last year, posting net earnings of US$23.9 billion ($2 trillion) yesterday as the British energy giant prepares for a criminal trial over the US Gulf of Mexico oil spill disaster.

BP announced adjusted profit after tax equivalent to euro 18.2 billion ($2 trillion) for 2011, as higher oil prices offset a drop in production, according to a group statement.

The company had suffered a loss of US$4.9 billion in April 2010 when an explosion on the BP-leased Deepwater Horizon rig killed 11 workers, sent millions of barrels of oil into the sea and left the company with huge compensation costs.

Including changes in the value of BP's energy inventories, net profit hit US$25.7 billion in 2011, the group added yesterday.

"BP is on the right path," the company's chief executive Bob Dudley said in the release.

"2012 will be a year of increasing investment and milestones as we build on the foundations laid last year."

BP said that it had committed US$1 billion "for the early restoration of natural resources following the Deepwater Horizon accident in 2010."

It added that by the end of 2011 it had paid more than US$7.8 billion to meet claims and government payments, while US$15.1 billion had been paid into the trust fund used to compensate victims of the oil spill disaster.

The British company and its partners are set to face a trial beginning February 27 in New Orleans that consolidates a host of lawsuits seeking damages for economic losses, injury claims and environmental violations.

The trial also aims to resolve competing claims of liability among BP and its subcontractors, rig operator Transocean and Halliburton, which was responsible for faulty cement work on the Macondo well, whose leak triggered the oil spill.

Commenting on the upcoming case, Dudley said yesterday: "As I have said before, we are prepared to settle if we can do so on fair and reasonable terms, but equally, if this is not possible, we are preparing vigorously for trial."

BP has already booked a US$40 billion charge to cover cleanup efforts, compensation to fishermen and thousands of others affected by the spill and massive government fines and penalties that are still being assessed.

To meet its costs, BP has committed to selling US$38 billion worth of assets before the end of 2013 and has so far clawed back roughly half the amount.

On Tuesday, BP said it planned to sell its liquefied petroleum gas filling operations in a number of countries for an undisclosed amount.

"The oil giant has become a leaner and meaner operation as Bob Dudley sold off assets to meet compensation costs," ETX Capital trader Manoj Ladwa said on Tuesday.

"But with Brent Crude firmly trading over US$100 per barrel for over a year, BP's reversal in fortunes could be largely due to the price of oil as opposed to any efforts to turn around the business."

Despite the bumper profits, BP's share price dropped 1.59 per cent to 481.75 pence on London's benchmark FTSE 100 index, which was down 0.59 per cent at 5,857.82 points in midday deals.

The group also announced that it was raising its dividend by 14 per cent to eight cents a share for the fourth quarter of 2011 — the first rise since the company resumed paying dividends a year ago.

"Helped along by the strength of the oil price, the company has been able to report a significant upswing in earnings, albeit largely in line with estimates," said Richard J Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

"Meanwhile, this extra cash generation has allowed a generous increase in the dividend payment which marks a sign of future management confidence."