BP profits hit by lower oil price

Britain’s biggest oil producer’s total replacement cost loss for the second quarter was $2.25 billion, compared with a loss of $485 million in the first quarter, after it booked a post-tax charge of $2.8 billion to cover claims relating to the deadly explosion and oil spill on its Deepwater Horizon rig in 2010.

The London-listed energy company said second-quarter underlying replacement cost profit, its definition of net income, was $720 million, down from $1.3 billion in the same quarter previous year and $120 million below an analyst consensus provided by the company.

Profits at oil giant BP have plunged 44% to 720 million U.S. dollars (£549 million) in the second quarter.

The company said full-year capital expenditure would now come in below the $17 billion target it had previously given. BP’s net loss narrowed to $1.4 billion from $5.8 billion.

Earlier this month, the company said it estimated the final pre-tax costs of the disaster at $61.6 billion, including fines, litigation, and environmental costs. Including these charges and other non-operating items, BP made a loss of $1.4 billion over the period.

Oil companies have rushed to cut costs and curtail investment after oil prices fell to a 12-year low in January, resulting in tens of thousands of job losses in the United Kingdom alone.

In April 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico, killing 11 workers and causing an oil spill that became the worst environmental disaster in USA history.

“The sigh of relief emanating from BP HQ is nearly palpable as the Gulf of Mexico spill is finally consigned to the history books”, said Richard Hunter, head of research at Wilson King Investment Management. “We are delivering significant improvements to the business that will stick at any oil price”.

“We are very pleased to have finally drawn a line under the material liabilities for Deepwater Horizon”, said Chief Executive Bob Dudley.

“We are now well down the path of transforming our business to compete, whatever the future holds”.