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BP raises profits, Gulf oil spill costs

BP with less Q1 profit, gulf spill costs
London (UPI) Apr 27, 2011 - European oil giant BP saw its first quarter profit drop but faced fewer costs from the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

Replacement cost net profit, which ignores changes in oil and gas inventory, was $5.48 billion in the three months from January to March, BP said in a statement Wednesday. That's down 2 percent compared to the same period last year.

The results come as the recent surge in oil prices is speculated to significantly boost profits at competitors such as Exxon Mobil, Chevron and Royal Dutch Shell.

BP's loss is due to the aftershocks of the Deepwater Horizon accident, which resulted in 11 deaths and the worst oil spill in U.S. history and reduced BP's production.

Washington suspended deep-water drilling in the gulf and BP decided to sell fields and refineries worth more than $24 billion to help raise some $41 billion for spill-related costs.

Production in this quarter fell 11 percent compared to the same period 2010, BP said.

In news that should soothe investors, cleanup costs related to the gulf spill fell to $384 million in the first quarter, compared to more than $1 billion in the last three months of 2010.

"The majority of the shoreline cleanup phase of the incident was completed in the first quarter of 2011," BP said. "Limited work continues to complete cleaning of the impacted marshes and barrier islands."

Sub-sea work, including the plugging and abandonment of the second relief well, has also been completed, BP said.

Analysts, however, warn of the great uncertainty over the final bill BP will incur because of the gulf spill.

The four companies linked to the Deepwater Horizon -- apart from BP also Halliburton, Transocean and Cameron, an equipment maker -- have filed legal claims against each other worth more than $100 billion.

While a court deal is unlikely, a settlement could hurt each company. And potential damages linked to gross negligence, a charge the companies involved deny, could result in more costs.

Meanwhile, BP is still trying to resolve a conflict with its Russian shareholders in TNK-BP over a planned deal with Rosneft, Russia's largest oil producer, that is aimed at replacing some of the lost production capacities. The deal foresees handing Rosneft shares and BP a stake in developing the Arctic's oil and natural gas fields, in a move that analysts said was aimed at diversifying from the gulf.

by Staff Writers
London (AFP) April 27, 2011
BP's first-quarter net profits leapt 17 percent thanks to high crude prices, the British energy giant said Wednesday, adding that it was revising upward the cost of last year's fatal Gulf oil spill disaster.

Earnings after tax jumped to $7.124 billion (4.9 billion euros) in the three months to March, compared with the first quarter of 2010, BP said in a results statement.

It added that the 2010 Gulf of Mexico spill would cost BP $41.3 billion, up from a previous guidance of $40.9 billion, and warned of "significant uncertainty" surrounding the company's ultimate exposure.

"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 fell 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, higher costs, higher exploration write-offs and a lower contribution from gas marketing and trading."

BP shares closed up 0.39 percent at 466 pence as investors looked past the Gulf fallout to focus on the profits rise. London's benchmark FTSE 100 index dipped 0.02 percent to 6,068.16 points.

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

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

The blast 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.

BP is attempting 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.

BP also recently unveiled a landmark but hugely controversial Arctic exploration and share-swap scheme 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 as 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.

Meanwhile, an unexploded German World War II mine was found near one of BP's British pipelines, threatening to briefly close an artery that handles 40 percent of the country's oil, the company said Wednesday.

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