BP posts $17B quarterly loss

Embattled energy titan BP took a $32.2-billion-US charge related to the Gulf of Mexico oil spill in the second quarter, leading the British-based multinational to its first quarterly loss in 18 years.

The company lost $17 billion US during the quarter, compared with a profit of $4.39 billion US a year earlier. All figures are in U.S. dollars.

It is the company's first loss since 1992 and the charge includes the $20-billion compensation fund the company set up following pressure from U.S.  President Barack Obama to recompense victims of the April 21 sinking of the Deepwater Horizon oil rig in the Gulf of Mexico, which started an oil leak that has only recently been stopped.

Thus far, the company has spent $2.9 billion trying to repair the damage. In addition, BP has issued 800,000 cheques worth some $243 million in compensation to people affected along the 1,345 kilometres of oil-marred coastline.

Despite the loss, the company stressed its strong underlying financial position — revenue for the quarter was up 34 per cent at $75.8 billion US. "Outside the Gulf it is very encouraging that BP's global business has delivered another strong underlying performance," outgoing BP CEO Tony Hayward said.

"[That] means that the company is in robust shape to meet its responsibilities in dealing with the human tragedy and oil spill in the Gulf of Mexico."

'End of the beginning'

He added that the company had reached a "significant milestone" with the capping of the leaking well. "In the words of Winston Churchill, it is not the end, nor the beginning of the end, but it might be the end of the beginning," he said.

The company plans to sell $25 billion to $30 billion worth of assets to pay for the disaster. That's up from the $10 billion it originally estimated it would have to divest in June.

The sales will come primarily from its $250-billion exploration and production portfolio and assets will be selected "on the basis that they are worth more to other companies than to BP." The company has already made a start with the $7-billion sale of gas assets in the United States, Canada and Egypt to Apache Corp.

The company's underlying replacement cost profit, a closely watched financial metric, was $5 billion for the three months between April and June, when adjusted for one-off items and accounting effects. That compared favourably with a $2.9-billion profit for the second quarter of 2009.

Higher prices for oil and gas made up for slightly lower output and a loss in gas marketing and trading in exploration and production, while the refining and marketing division reported increased profits as a result of strong performance in the fuels value chains and the lubricants and petrochemicals businesses.

The company said it planned to reduce net debt to a range between $10 billion and $15 billion within the next 18 months, compared with net debt of $23 billion at the end of June, to ensure that it had the flexibility to meet its future financial obligations.

Capital spending for 2010 and 2011 will be about $18 billion a year, in line with previous forecasts.