Oil giant BP has set aside another $260 million for compensation claims arising from the Deepwater Horizon oil pipe blow-out it experienced in the Gulf of Mexico five years. This brings the total it has set aside for compensation payments to $4.3 billion.
These figures were announced at the bottom of the company’s second-quarter results for 2014, which reported underlying replacement cost profit for the quarter of 2014 was $3.6 billion, 34% higher than the $2.7 billion reported for the same period in 2013 and 13% higher than the $3.2 billion result for the first quarter of 2014.
The company also announced a quarterly dividend of 9.75 cents per ordinary share, the same level as the previous quarter but 8.3% higher than a year earlier. Rising oil and gas production from new and recently-started higher-margin upstream projects and increased processing of heavy crude oil by the newly-modernised Whiting refinery contributed to operating cash flow of $7.9 billion in the quarter.
Total operating cash flow for the first half of 2014 was $16.1 billion.
Divestments with a cumulative value of $3.4 billion have now been agreed towards BP’s expected total of $10 billion divestments agreed by the end of 2015. Most recently BP agreed the sale of its Hugoton gas assets in Texas for $390 million.
BP plans to use the post-tax proceeds from these divestments predominantly for shareholder distributions, with a bias to share buybacks. In mid-July BP completed the $8 billion share buyback programme introduced following the sale of its interest in TNK-BP, and the divestment programme is now supporting a continuation of buybacks.
In the second quarter, BP’s Upstream segment reported $4.7 billion underlying pre-tax replacement cost profit, compared with $4.3 billion a year earlier and $4.4 billion in the first quarter of 2014.
Compared to a year earlier, the Upstream result reflected the benefits of higher production in key regions and higher oil and gas realisations. This was partly offset by the impact of divestments and higher non-cash costs.
Increasing output from the key regions, primarily the Gulf of Mexico, drove overall underlying production2 of oil and gas, excluding Russia, up by over 3% compared to a year earlier.