BP Returns to Profit Despite Oil Spill Charge
Oil giant BP (BP) announced Tuesday that it had an operating performance that helped it become profitable again in 2010's third quarter, even though the company took an additional pretax charge of $7.7 billion related to the Deepwater Horizon oil spill.
The U.K.-based oil company reported that "Headline replacement cost profit for the third quarter was $1.8 billion, compared with a loss of $17.0 billion in the previous quarter and a profit of $5.0 billion in the third quarter of 2009. That means profits dropped 66% from the year earlier period. On an underlying basis, after adjusting for non-operating items, third-quarter replacement cost profit was $5.5 billion, an increase of 18 percent on the year-ago quarter."
"The additional pre-tax charge of $7.7 billion for the Gulf of Mexico spill followed a charge of $32.2 billion in the second quarter and was due principally to higher spill response costs," the statement said. "This reflected a delay in completing the relief well that finally sealed the Macondo well in September, additional mandated costs for decontaminating and demobilising vessels involved in the response, claims centre administration costs and additional legal costs."
The numbers from BP so far this year indicate that the oil spill has cost it nearly $40 billion. In mid-summer BP reserved $32.2 billion to cover the cost of the cleanup
"The level of costs is a bit of a surprise," said Greg Smith, managing director of Fat Prophets in London, in a Bloomberg Television interview. "But BP has been pretty prudent in this regard. The balance sheet is being solidified. Dudley's mission now will be safety and ensuring BP's reputation is restored."