LONDON — The British oil giant BP said it planned to step up its defense against litigation stemming from the 2010 Gulf of Mexico oil spill as it continued to endure the financial fallout from the disaster, reporting weaker-than-expected earnings on Tuesday.
BP’s chief executive, Robert W. Dudley, told reporters that the company was determined to fight what he called “false and fictitious” claims under a settlement last year with lawyers for businesses that incurred damaged from the spill.
The oil giant said that the administrators of the settlement had made excessive payments to businesses, including to some that did not suffer damage. Mr. Dudley said that BP would try to recover payments already made if it considered them unfair.
BP originally estimated that the settlement would cost $7.8 billion, but increased that estimate on Tuesday to $9.6 billion, stressing the final cost would likely be “significantly higher.” While the company still has about $6.9 billion in a fund to pay such damages, BP is setting aside more money to cover potential legal costs. The overall charges stemming from the spill rose $200 million to $42.4 billion at the end of the quarter.
Separately, the first phase of a civil trial in New Orleans to determine the liabilities of BP and other companies finished in April and is scheduled to resume on Sept. 30. Billions of dollars in damages for BP will be at stake in the court’s ruling. Mr. Dudley said he thought it was “highly unlikely” that BP would enter into detailed settlement discussions in the case.
“As we continue to fight what I think are absurd outcomes,” he said, “we want everyone to know that we are digging in and are well-prepared for the long haul on legal matters.”
BP shares were down about 3 percent in London.
The company’s tough stance came as BP reported second quarter profit of $2.7 billion after certain adjustments, down 25 percent from the previous year and substantially below analysts’ consensus. The company said lower oil prices, as well as unfavorable tax rates, in Russia and elsewhere, weighed on its results.
The company continues to wrestle with the gulf spill, which left 11 people dead and spilled millions of barrels of oil. BP’s output in the United States, a crucial region for the company, dropped 4.4 percent from the previous year, reflecting asset sales and a post-spill moratorium on drilling. BP said that overall production in the third quarter was expected to be lower because of maintenance and disposals.
Since 2010, the company has sold about $38 billion worth of assets outside Russia, mostly oil and gas fields that it deemed nonessential, to help pay for its legal issues. It completed a sale earlier this year of its 50 percent stake in its Russian affiliate TNK-BP to Rosneft for $12 billion in cash and shares in the company. These divestments have left BP a considerably smaller company but one that Mr. Dudley said would be more focused, safer, and, eventually, more profitable.
“We continue to build a strong platform to deliver value and sustained growth in operating cash flow,” he said.
Peter Hutton, an analyst at RBC Capital Markets in London, wrote in a research note on Tuesday that given the lower production and maintenance issues, “signals of operating momentum remain difficult to show.”
A central reason for BP’s disappointing performance was the low contribution from BP’s nearly 20 percent shareholding in Rosneft, the Russian state-controlled oil giant. Mr. Hutton said that BP’s share of Rosneft’s net income, which came to $218 million, amount to roughly one-third of expectations.
While BP and Rosneft are still in the early days of their partnership, the earnings of the venture, which accounts for 30 percent of BP’s output, may be difficult to forecast. Mr. Hutton said the recent results highlight “how opaque results are difficult to predict.” BP said that Rosneft’s profit was hit by the weakness of the Russian ruble against the U.S. dollar as well as an export duty regime that has a bigger negative impact at times of falling prices.
BP did have pockets of strength.
The company said that it had bought back $2.4 billion worth of shares as of July 26 in what is expected to be an $8 billion program. It also announced that it would pay a dividend of 9 cents per share for the quarter, up from 8 cents the previous year though unchanged from the first quarter.
“As of two or three years ago we were a weaker company, ” Mr. Dudley said. “Now our balance sheet is strong again.”
Article source: http://www.nytimes.com/2013/07/31/business/global/bp-reports-drop-in-second-quarter-income.html?partner=rss&emc=rss