BP's $5.1bn profit still crude

It’s over a year since BP finally sealed off the well that leaked 5 million barrels of oil into the waters of the Gulf of Mexico, but its nightmare isn’t quite over yet. The company reported a replacement cost profit (the measure used by oil companies to factor out fluctuations in oil prices) of $5.1bn (£3.2bn) – which may be up from the $1.8bn it made this time last year, but there were various mitigating circumstances surrounding that (namely, hefty fines to pay off). And, given the oil prices, it’s still not quite at the level it should be. Time for some serious ‘de-risking’, says CEO Bob Dudley.

Admittedly, those oil prices were something of a saving grace for BP. While motorists were audibly groaning as they filled up their petrol tanks, record-beating prices outweighed the fact that the company had been forced to sell off some of its fields to pay for clean-up costs, causing BP’s total production to drop by 12% to 3.319 million barrels. On top of that, the company took more rigs than usual out of action for maintenance (presumably to make extra sure after the Gulf of Mexico incident). But that’s come to an end, now, so things should start to get back on track.  

What’s also encouraging is that, exploration-wise, BP says the past 12 months have been its most successful in 10 years: it’s gained 67 new licences in 11 countries, including major deals in both Brazil and India. That said, its more intrepid days might be numbered: the company is half-way through a strategic review that will report in February and is expected to point out that riskier explorations, in extra-deep water, for example, might not be worth the gamble. After all, Deepwater Horizon did kill 11 workers, cause untold damage to the environment and cost an estimated $41bn.

Dudley said he’d put a number of measures in place to ‘de-risk’ (no, we don’t like it either) BP: ‘We are… learning, applying and sharing the lessons of the accident, restructuring BP and putting safety and risk management at the absolute heart of our operations,’ he said. Which all sounds great – but the devil of ‘de-risking’ is in the detail. As Deepwater Horizon demonstrated only too well, some risks – usually the really big ones – are pretty hard to deal with. So we’ll see how successful Dudley’s strategy is…

Still, what matters that its shareholders approve – and despite the fact that it has taken rather a long time to recover from the disaster, shares opened 2.7% higher this morning. What a relief.