spill

Spill Claims Rising, BP Announces Weak Results

July 30, 2013 by NewsMaker

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 damage 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 added 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 most 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 3.4 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 also continues to deal with the repercussions of the gulf spill, which left 11 people dead and spilled millions of barrels of oil. BP’s output in the United States dropped 4.4 percent from the previous year, reflecting asset sales and a post-spill moratorium on drilling. BP said that production in the third quarter was expected to be lower.

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, $218 million, was 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 highlighted “how opaque results are difficult to predict.” BP said that Rosneft’s profit was hit by the weakness of the Russian ruble against the American 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 a 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

As Gulf Tourism Rebounds, BP Seeks to Lower Payments

The numbers tell a similar story, with many tourism-related businesses having their best summer in years.

BP felt obliged to note this officially. Last Friday, in a court filing that included a detailed list of indicators of “the strength of the gulf economy,” BP argued that “there is no basis to assume that claimants, with very limited exceptions, will incur a future loss related to the spill.”

The response here: Hold on, it’s not that good.

Since the spill last year, messages from the coast have been somewhat mixed, with some businesses arguing that it is continuing to hurt the coast and that more assistance is needed, and others, often led by tourism officials, emphasizing the positive to entice visitors and consumers.

This is not necessarily contradictory, as the effects of the spill were infuriatingly uneven, and a business does not have to be empty to be hurting. But the summer of 2011, a strong one by a variety of measures, has made this balance harder to strike.

BP has long taken issue with the formula created by Kenneth R. Feinberg, who oversees the Gulf Coast Claims Facility, which is dispensing BP’s $20 billion compensation fund. Under the formula, settlements would generally be double the demonstrable losses from 2010, with money previously paid by the fund subtracted.

BP has been arguing that this “future factor” is too generous. That argument is revisited in its 29-page filing, pointing out the strong revenue figures for lodging in coastal tourism areas in the fall and spring, most surpassing figures from comparable times in 2009 and early 2010.

BP makes the same argument in regard to the strong performance of much of the seafood industry, though the filing devotes less attention to it — possibly because unresolved questions about the long-term ecological effects of the spill, as well as a lingering nationwide skepticism about gulf seafood, have made its recovery more debatable.

Tourism, on the other hand, seems rather straightforward.

Taxable lodging revenues from rentals in Gulf Shores and its neighboring resort town, Orange Beach, fell by more than half last summer.

After months of aggressive marketing, largely paid for with the tens of millions of dollars that BP sent to states for that very purpose, tourism officials are now boasting of record, or near-record, numbers: going in to the Fourth of July weekend, tourism officials here reported vacation rental occupancy rates that hovered near 100 percent, all above — and some far above — rates at comparable times in 2009.

These figures would seem to bear out BP’s assertion that the recovery has firmly set in, to the chagrin of some coastal residents.

“Our state and local leaders have been so quick to declare that the beaches, seafood and Gulf Coast are doing fine that we may have screwed up the chances of the remaining outstanding BP oil spill claims to be paid,” Rick Outzen, publisher of the Independent News, an alternative weekly in Pensacola, Fla., wrote on his blog. Business owners here acknowledge that it has been for the most part a good summer. But they are quick to add that the effects of the spill are more complicated than they may appear.

The tourism business is a lot like farming; it is seasonal and involves managing a financial cycle between fat and lean seasons.

Up to 90 percent of the income for many Gulf Shores businesses is made during June, July and August; by winter that money is largely gone and businesses usually take out lines of credit to prepare for summer.

This was the case going into the summer of 2010, which was itself projected to be something of a recovery year after 2009, a down season of recession and high gas prices.

But in 2010, there was no summer. Hotels sat empty or filled rooms only by offering steep discounts. Smaller businesses like beach chair rentals went under; charter boat operators barely hung on. The whole spend-save-borrow cycle was thrown off.

“What happened last winter was a lot of lenders stopped the line of credit because they didn’t know the impact of what the spill was going to be,” said Sheila Hodges, owner of a real estate firm in Gulf Shores. “We barely survived the winter. Some didn’t survive the winter.”

Article source: http://feeds.nytimes.com/click.phdo?i=b888943fa70ea1ee14be665b6051dd16

Spill Claims Rising, BP Announces Weak Results

As Gulf Tourism Rebounds, BP Seeks to Lower Payments

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