BP’s oil spill recoup payouts leap in Q2

LONDON - Reuters

Fire boat response crews battle the blazing remnants of the offshore oil rig Deepwater Horizon in the Gulf of Mexico in 2010 in this file photo. REUTERS photo

BP’s $20 billion Gulf of Mexico oil spill trust fund has almost run out after provisions for compensation costs so far leaped by $1.4 billion in the second quarter.

The British oil company has just $300 million left in the fund and the deadline to claim for losses by Gulf coast businesses - which make up the bulk of claims for the 2010 spill - is not until April next year.

BP has said claims beyond what the fund can pay will be taken straight off future profits. Its shares fell 2.8 percent in early trade. The company revealed the extra cost in its second-quarter results, which missed profit forecasts due to the lagging effect of tax in Russia, where the price of Urals crude was weaker, and due to the tax effects of a stronger dollar on a basket of currencies.

Adjusted net profit for the quarter reached $2.71 billion compared with expectations of $3.41 billion and with $3.6 billion a year ago. Profit was also hit by lower prices and by lower production - partly the result of asset sales to pay the costs of the spill, which killed 11 men and despoiled the Gulf of Mexico coastline.

The extra $1.4 billion of spill compensation costs come on top of a $500 million addition in the first quarter and bring BP’s estimate of the cost of compensation claims so far to $9.6 billion.

Some $900 million is for extra claims, while about $500 million is for the costs of the claims administrator, BP said.

BP is locked in a legal battle over the compensation payouts with the administrator, Patrick Juneau. It says Juneau is paying out “fictitious” and “absurd” claims due to a misinterpretation of the settlement.
But so far it has lost all its court battles and appeals to stop the payouts.

Well safety

Last week, its legal campaign appeared to receive a boost when Halliburton, which was involved in preparing the doomed Macondo well for production, abandoned one of its arguments that tried to paint the British oil company as unconcerned about well safety.

Analysts expect BP’s final bill to be billions bigger.