BP today announced that its second-quarter profit sank by more than 60% compared to last year as the company digested the huge costs of its oil blow-out in the Gulf of Mexico in 2010.
Earlier this month, BP reached an $18.7 billion settlement with the US government and five states to resolve most claims from the oil spill five years ago, the largest corporate settlement in US history.
While BP had been expected to take a $10 billion charge for this at some point, it said on Tuesday it had also agreed to pay up to $1 billion to resolve claims from local government entities, taking cumulative pretax charges for the Macondo rig explosion and spill that killed 11 workers to $55 billion.
As a result, the company took a pretax charge of $10.8 billion in the second quarter, including a $9.8 billion charge related to the government settlements.
Underlying replacement cost profit1 for the quarter was $1.3 billion, compared with $2.6 billion for the previous quarter and $3.6 billion for the second quarter of 2014. The result reflected the impact of continued low oil and gas prices, a reduced contribution from Rosneft, and one-off charges arising from circumstances in Libya, but also continuing strong earnings from BP’s downstream businesses and lower cash costs throughout the group.
Bob Dudley, Chief Executive, said: “The external environment remains challenging, but BP moved quickly in response and we continue to do so. Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the group and we continue with capital discipline and divestments.”
In the second quarter the Brent crude price averaged $62 a barrel, compared with $54 a barrel in the first quarter and $110 a barrel in 2Q 2014. In the third quarter to date, the price has averaged $58 a barrel.
Dudley added: “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.”
Norwegian oil giant Statoil has today reported higher-than-forecast earnings, but said it was lowering its capital spending outlook for the year