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BP logs soaring profits, but upgrades oil spill costs

by Staff Writers
London (AFP) April 27, 2011
Energy giant BP said on Wednesday that first-quarter profits leapt 17 percent, boosted by high crude prices, but ramped up its costs estimate one year after the devastating oil spill disaster.

Earnings after taxation jumped to $7.124 billion (4.9 billion euros) in the three months to March, compared with the equivalent figure of the previous year, BP said in a results statement.

However, BP added that the 2010 Gulf of Mexico spill would cost it $41.3 billion, compared with previous guidance of $40.9 billion, and warned of "significant uncertainty" surrounding the company's ultimate exposure.

And owing to the increased charge, BP's adjusted profits -- which also strip out the impact of changes in the value of oil inventories -- fell by two percent to $5.481 billion.

"The aftershocks from the Gulf of Mexico oil spill continue to impact BP," said equity analyst Keith Bowman at Hargreaves Lansdown Stockbrokers.

"Production is lower, thanks to forced asset sales made in order to pay for last year's catastrophe, whilst the exact cost of the oil spill is still as yet unknown."

Oil and gas production meanwhile sank 11 percent to 3.58 million barrels per day, as output was hit by the BP's decision to sell off $30 billion of assets to meet the clean-up bill.

BP added in the statement: "The primary additional factors impacting the first-quarter result ... were lower production volumes (including from the impact of divestments), higher costs (including rig standby costs in the Gulf of Mexico), higher exploration write-offs and a lower contribution from gas marketing and trading."

But BP shares gained 1.43 percent to 470.85 pence in London midday trade as investors shrugged off the news.

"In all, investors believe that BP can recovery from this dire chapter in its history, with market consensus opinion currently denoting a cautious buy," added Bowman.

Wednesday's first-quarter results were published one year after a explosion on the Deepwater Horizon rig killed 11 workers and caused millions of barrels of oil to spew into the sea.

The blast, which occured on April 20, 2010, ravaged BP's fortunes in what has been widely acknowledged to be the worst environmental catastrophe in US history.

In the wake of the disaster, American Bob Dudley was appointed chief executive in October 2010, after his predecessor Tony Hayward resigned amid intense US political pressure and criticism over his handling of the incident.

The group is now trying to move on from the disaster, which knocked billions of dollars off its value, after agreeing to share responsibility with the owner of the rig, Transocean.

And earlier this year, BP unveiled a landmark but hugely controversial Arctic exploration and share-swap deal with Russian state-run oil giant Rosneft.

In Moscow on Wednesday, BP's joint venture TNK-BP announced that profits nearly doubled in the first quarter of 2011, underscoring the value of a firm at the centre of a dispute between its owners.

TNK-BP -- jointly owned by BP and a group of Russian oligarchs -- reported a 91-percent year-on-year increase in net income to $2.4 billion, confirming its status is one of the world's 10 biggest private energy producers.

"Such outstanding performance once again underscores the tremendous value and promise of TNK-BP -- one of the most dynamic and profitable oil and gas companies in the world," chief executive Mikhail Fridman said in a statement.

Fridman noted that the rapid growth came "despite disruptions at the shareholder level" -- a clear reference to the boardroom battle the Russian tycoons who control half of the firm are waging against their British partners.

The Russian partners argue they have a right of first refusal on any BP project in Russia, and have since rejected a buyout offer from the British firm.

The local billionaires have used the courts to successfully block BP's deal with Rosneft, which is Russia's largest oil company.

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