BP says its Gulf of Mexico fund 'will be fully utilised'
- 30 July 2013
- From the section Business
BP says the compensation fund that it set up to pay claims related to the Gulf of Mexico oil spill 'will be fully utilised' within the next three months.
The oil giant announced that the fund, which originally had $20bn, has just $300m of spare, unallocated cash left.
The deadline for businesses to claim loss of earnings due to the spill is not until April next year.
BP put $1.4bn aside in its second quarter to cover the costs of claims.
The company said: "We expect that, in the third quarter, the remaining amount for items covered by the trust will be fully utilised and additional amounts will be charged to the income statement."
BP says once the fund runs out, further claims will come straight out of future profits.
$11.8bn of the $20bn trust has already been paid out, and some $1.3bn has been earmarked for claims arising from the seafood industry. Apart from $300m, the rest is an unspecified provision against a variety of possible claims.
The company also said that it remains in a legal dispute over a court interpretation of the settlement agreement which was signed in the wake of the 2010 Deepwater Horizon disaster.
BP said the agreement allows businesses in the US to make claims for losses that don't actually exist.
In an effort to reassure investors that the company is fit enough to endure a lengthy legal battle, BP's chief executive Bob Dudley said: "As we continue to fight these absurd (compensation) outcomes and as the likelihood of extended litigation on other matters increases as a result, we want everyone to know that we are digging in and well-prepared for the long-haul on legal matters."
The explosion on the oil platform killed 11 people and the resultant oil spill caused economic and environmental damage across several US Gulf coast states.
The extra $1.4bn charge weighed heavily on BP's second quarter figures, with adjusted net profit for the quarter down 25% at $2.71bn, compared with the same period a year ago.
The results were below analysts' forecasts and BP's shares were more than 3% lower in London.
BP said the stronger US dollar also dented earnings and the lagging effect of Russian oil export duty also dented profits.
Nonetheless, Mr Dudley said that the results show a "strong underlying pre-tax performance".
"Completion of our operational milestones confirms our confidence in delivering our commitment to materially increase operating cash flow in 2014." he said.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said BP is trying "to look forward but remaining firmly anchored to the past."
He added that BP remains hostage to "oil price, government appetite for tax revenues and the strength of the broader global economy."
However, others were more optimistic.
Jason Kenney, an analyst with Santander, said that "the core upstream division was actually ahead of consensus and that's still going great guns. The refining and marketing division is probably as expected."
"Fundamentally, I think BP's still moving forward," he added.