BP oil spill costs reach nearly $40 billion

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Nov. 2 -- BP PLC said its costs related to the Gulf of Mexico oil spill have reached $39.9 billion through the end of the third quarter. Executives speaking during an earnings conference call said the cost figure was a current best estimate of spill costs that can be reliably measured at this time.

Despite a third-quarter pretax charge of $7.7 billion related to the spill, BP’s financial results showed a third-quarter profit of $1.79 billion, which was well below its $5.2 billion profit for the third quarter 2009.

“These results demonstrate that BP is well on track for recovery after the tragic accident on the Deepwater Horizon drilling rig and subsequent oil spill,” said Bob Dudley, BP chief executive. “This strong operating performance shows the determination of everyone at BP to move the company forward and rebuild confidence after the terrible events of the past 6 months.

The $7.7 billion pretax charge followed a second-quarter spill-related charge of $32.2 billion. A relief well permanently sealed the Macondo well on Sept. 19 following an Apr. 20 blowout that resulted in a fire and explosion on Transocean Ltd.’s Deepwater Horizon semisubmersible, killing 11 people. A sealing cap installed on July 15 stopped oil and gas from leaking into the gulf.

BP’s exploration and production unit reported lower production volumes as a result of normal seasonal turnaround activities and as a consequence of the oil spill, executives said. BP declined to release production estimates on Nov. 2, saying that it will provide that early next year.

Byron Grote, BP chief financial officer, told analysts that BP believes it is time to resume deepwater drilling in the gulf. The US government lifted a temporary drilling ban imposed after the spill, and BP executives noted it will take awhile for industry to regain drilling momentum.

BP spokesman Fergus MacLeod said, “There will be an ongoing impact out through 2011,” of the restoration of gulf drilling activities. “The entire industry is very keen to get back to work in the gulf.”

Regarding multiple ongoing US government investigations into the spill, BP executives said they have no timetable for the completion of those investigations although the investigations are expected to continue into 2011.

BP continues with an asset divestment program, reporting sales agreements in place totaling $14 billion compared with a goal of $20-30 billion by yearend 2011.

Contact Paula Dittrick at paulad@ogjonline.com.

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