The 2010 Deepwater Horizon spill came back to haunt BP once again in 2Q 2015, as the company reported a massive loss of US$6.3 billion, largely due to the deadly Gulf of Mexico incident.
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Bob Dudley. From BP Flickr. |
The UK supermajor’s total costs for Macondo came in at $10.8 billion for 2Q, which included the $9.8 billion associated with government settlements, business economic claims, and ongoing costs. The total cumulative pre-tax charge for the incident is now $54.6 billion.
Following the agreements in principle announced on 2 July, BP has now advised the Court that it is satisfied with and has accepted releases received from the vast majority of local government entities. Accordingly, on 27 July, the District Court ordered BP to commence processing payments required under the releases and that such payments be made within 30 days of the Court's order. As part of the agreements in principle, BP agreed to pay up to $1 billion to resolve claims made by local government entities, BP said in its quarterly results.
In addition to Macondo, BP attributed its 2Q 2015 losses to low oil and gas prices, reduced contribution from Russia’s Rosneft, and around $600 million of exploration write-offs and other costs related to BP’s activities in Libya stemming from circumstances in the country.
BP’s underlying replacement cost profit for 2Q came in at $1.3 billion, a 50% drop from 1Q 2015 at $2.6 billion, and a nearly 64% drop from 2Q 2014 of $3.6 billion.
BP noted in its report that Brent crude prices averaged $62/bbl in 2Q 2015, compared to $54/bbl in 1Q, and $110/bbl in 2Q 2014. In 3Q 2015, the company is estimating the Brent average will be about $58/bbl.
“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,” said Bob Dudley, BP Group chief executive.
BP also saw a decrease in its operating cash flow. In 2Q 2015, it was $6.3 billion, a 23% fall from last year’s $7.9 billion.
BP’s simplification and efficiency programs to sustainably reduce non-safety-critical cash costs are delivering results throughout the Group; total cash costs in 2015 to date are estimated to be around $1.7 billion lower than the same period last year. In 2Q BP took a further $270 million non-operating restructuring charge, bringing the total over the past three quarters to $920 million. BP now expects restructuring charges to total near to $1.5 billion by end-2015, the company said.
The quarter’s report announced the commencement of the Greater Plutonio Phase III project offshore Angola, the company’s second major upstream project start-up in 2015. An additional two projects are expected before year-end.
Earlier this month, BP reached an $18.7 billion settlement agreement to be paid over an 18-year period for the Deepwater Horizon incident. The agreement came less than one week after the US Supreme Court declined to hear the company's appeal.
The settlement will be paid to federal, state, five Gulf Coast states including Alabama, Florida, Louisiana, Mississippi, and Texas, and more than 400 local government entities. Payments will be made by BP US upstream subsidiary BP Exploration and Production Inc.
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