The costs associated with Deepwater Horizon continue to eat away at BP’s profits, even while revenues are on the up. BP’s downstream activities - refining and sales of petroleum products – turned over a record amount last year, according to a company statement. Yet, BP made just $17.6bn (£11.2 billion) in underlying replacement cost profit (which strips out the effect of oil price fluctuations) for the year to December 31, down from $21.7bn in 2011.
Nevertheless, its fourth quarter profits, down from $5bn last year to $4bn, have beaten analysts expectations and BP’s share price rose 2% in early trading.
The markets are anticipating an end to the Gulf of Mexico saga. Just days ago, BP pleaded guilty to corporate manslaughter in the US courts, agreeing to pay the Department of Justice the record sum of $4.1bn. BP will also pay a $525m fine to the Securities and Exchange Commission over a period of three years. There is only one more court case to get out of the way: a civil trial in the US is expected to begin on February 25 but BP reckons the pay-outs for these cases will be ‘reasonable’.
BP chief executive Bob Dudley is certainly keen to draw a line under the disaster, ignoring the elephant in the room in his corporate statement: ‘We have moved past many milestones in 2012, repositioning BP through divestments and bringing on new projects. This lays a solid foundation for growth into the long term,’ he says. ‘Moving through 2013 we will deliver further operational milestones and remain on track for delivery of our ten-point strategic plan, including our target for operating cash flow growth, by 2014.’
The 2010 Deepwater Horizon disaster was one of the worst environmental disasters in US history, spilling millions of barrels of crude oil into the Gulf of Mexico over 87 days. Over the last few years, the firm has been selling properties and oilfields worth billions to raise the cash to settle all the claims that have been brought against it. At last count, the monies paid out over the spill topped $42.2bn - equivalent to the GDP of Lithuania.
Despite all Dudley's talk of milestones, when this is all over, BP is going to be a much smaller, less diverse company, and potentially less attractive to investors.
Deepwater Horizon may come to an end, but it will be many, many more years before BP approaches its former glory.