BP p.l.c. (BP) is the holding company of one of the world's largest petroleum and petrochemicals groups. Their main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals. They have a growing activity in gas and power and in solar power generation. BP has well-established operations in Europe, North and South America, Australasia and Africa.
BP posted its first results since the announcement of their massive Deepwater Horizon settlement a few weeks ago. As we noted at the time, the 2010 spill was a disaster for the Gulf and BP's reputation, exposing lax safety practices and a seeming lack of concern on the part of the firm and CEO Tony Hayward. Hayward's legendary “Sorry” speech, which was a PR disaster, led to his widespread ridicule and eventual resignation.
Today, the company reported a loss in excess of $6 billion due to lower oil prices and the massive hit to the bottom line from the settlement. The company tried to spin this as a good thing, as “paying the piper” removes uncertainty related to the spill moving forward. BP no longer has claims pending from the US government or the five Gulf states effected by the massive oil spill.
According to the Wall Street Journal, the total cost of the spill to the company has now exceeded $55 billion and the company had to sell off @$40 billion in assets to deal with the disaster. BP plans to continue to shed assets to pay off clean up costs and legal fees. While the major lawsuits were settled earlier this month, they still have to meet pay out schedules in excess of $18 billion for the next 18 years.
BP reported earnings of $0.43/share, which missed estimates of $0.48/share by five cents. Company net income came in at $1.3 billion, which was a miss of analyst estimates for $1.64 billion–and well below last year's figure of $3.6 billion. Despite the lower profits, the company will keep its dividend of $ 0.10/share.
And, the company's issues are not purely spill related. BP is the first big company to report this quarter, and analysts are waiting to see how its rivals fare. That should give a good indication of how big oil is going to fare with current crude prices. Crude oil is down yet again, despite a recent recovery. Today, the commodity was trading at @$53/barrel, down from recent prices in the high $60/barrel range–and from significantly hire prices in the $110/barrel range a year ago.
