BP to contest Gulf oil spill lawsuits

BP ratcheted up the rhetoric around multi-billion dollar claims from the Gulf oil spill by warning it would vigorously contest lawsuits over one of the world’s worst environmental disasters.

While reiterating BP’s “bias for settling” at hearings scheduled this month, chief executive Bob Dudley said he would only do so on fair and reasonable terms.

As he unveiled higher fourth quarter profit yesterday and a rise in the dividend, which he said showed BP was putting the spill behind it, Mr Dudley acknowledged that the lawsuits were the biggest uncertainty facing the British company.

“We have many people who do say, ‘we are interested in investing in BP but not until all this is behind you’,” he said.

BP faces 600 civil lawsuits from people in the US , as well as litigation from the US government.

“We always have had this bias toward settling and moving on, and reducing uncertainty,” Mr Dudley said, but added: “We are preparing vigorously for trial. We have confidence in our case.”

Analysts at Morgan Stanley have predicted BP will agree to pay the US government as much as $25bn (€19bn) in the coming weeks to settle fines and natural resources damages but Alastair Syme, oil analyst at Citigroup, said he expected the case to go to trial as planned on Feb 27.

BP, Europe’s second-largest oil company, also lifted its estimate of the total cost of the US’s worst-ever offshore oil spill by $1.8bn to $43bn due to higher costs for shoreline clean-up, which BP said was now largely complete, and a new $500m charge for legal fees.

By contrast, BP’s statement showed the company has valued the doomed Macondo prospect at just $400m.

BP said its replacement cost net profit rose 65% compared with the same period last year, to $7.61bn in the quarter, boosted by a $4bn contribution from Anadarko Petroleum, which had a stake in Macondo, towards clean up costs.

Stripping out one-offs, the result rose 14% to $4.99bn, in line with a consensus forecast of $4.89bn.

Rival oil giant Royal Dutch Shell reported an 18% rise in underlying profit in the quarter, while industry leader Exxon Mobil only managed a 2% rise.

Replacement cost profit excludes gains or losses relating to changes in the value of fuel inventories and so is comparable with net income under US accounting rules.

BP’s muted increase was despite an unusually low tax rate, higher gas prices and a 26% rise in the Brent crude price in the quarter compared to the same period of 2010.

Lower production weighed on the fourth quarter result, with assets sales, in part to help pay for the oil spill, pushing output down 5.1% to 3.49 million barrels of oil equivalent per day in the quarter.

Mr Dudley said he expected output to fall further in 2012, despite investor hopes that BP’s smaller asset base would facilitate higher growth.

— Reuters