TIME Earnings

BP Is Paying Big Time for the Gulf Oil Spill

A BP petrol station in London.
Nick Ansell—PA Wire/AP A BP petrol station in London.

The spill has now cost BP a total of $54.6 billion

BP Plc’s woes show no sign of ending as the company swung to $5.8 billion loss in the second quarter, thanks to falling oil prices and another $9.8 billion in charges to settle the remaining U.S. government claims for the Deepwater Horizon disaster.

The loss had been expected since the company announced the settlement in June, hoping to draw a line under the worst environmental disaster in U.S. history. The spill has now cost BP a total of $54.6 billion, and thousands of private claims against it are still outstanding. The company warned again on Tuesday that the impact of still-outstanding issues on its earnings could be “material”.

The company’s operating business looked little better, after a quarter in which crude prices fell to their lowest level in six years in a heavily oversupplied global market. Underlying cost replacement profits, the measure tracked by most analysts, fell to $2.43 billion from $5.90 billion a year earlier (before the sharp fall in crude prices) and from $2.53 billion in the first quarter of 2015. The bottom line was saved by BP’s downstream division, which includes refining, gasoline distribution and oil trading, and which generated over three-quarters of total underlying profit. By contrast, the contribution from its stake in Russian oil giant Rosneft halved to $510 million and upstream profits fell by nearly 90% to $494 million.

And there’s more gloom ahead: the company expects refining margins to shrink in the third quarter, and the spot crude price has tumbled in recent weeks as world commodity markets have taken fright at the scale of the economic slowdown in China. It expects its output of oil and gas to be broadly flat in the current quarter.

Like every other oil company, BP is scrambling to cut costs. It cut its capital expenditure by 22% in the first half of 2015 to $9.1 billion, and now expects full-year capex to be less than $20 billion, down from $22.9 billion in 2014. Some of those savings are being diverted to pay for other permanent cost reductions: the company now expects restructuring charges of $1.5 billion this year, up from the $1 billion it announced in December.

This article originally appeared on Fortune.com

TIME BP oil spill

BP May Have Billions More to Pay, Even After Its $19 Billion Settlement

NBC News - Gulf Oil Spill
NBC NewsWire—NBC NewsWire via Getty Images The site of the oil spill at the Deepwater Horizon drilling platform.

The oil giant reportedly faces tens of thousands of additional claims

Despite reaching an $18.7 billion settlement earlier this month, BP probably isn’t done shelling out money to resolve claims stemming from the energy giant’s disastrous 2010 Gulf of Mexico oil spill.

BP is still facing compensation claims filed by tens of thousands of area businesses claiming that they suffered losses as a result of the oil spill.

BP’s recent massive settlement resolved all federal and state claims that came out of the Deepwater Horizon accident and included agreements with five Gulf Coast states — Alabama, Florida, Louisiana, Mississippi, and Texas — as well as more than 400 local governments. BP’s settlement also includes a $5.5 billion civil penalty to be paid over the next 15 years under the Clean Water Act. The company said in early July that the settlement brings the total amount BP has paid as a result of the 2010 oil spill to $53.8 billion.

But, the company is likely still on the hook for more money, with businesses lining up for compensation. According to the Financial Times, businesses filed more than 115,000 claims with the Deepwater Horizon Claims Center ahead of an early-June deadline for compensation claims. Thousands of those claims were either settled or thrown out, but FT reports that more than 60,000 claims have yet to be fully processed.

BP put aside more than $10.3 billion to cover the various compensation claims but, according to FT, the company may end up paying at least $2 billion more than that amount.

TIME Environment

BP Will Pay Gulf States $18.7 Billion Over Oil Spill

The oil spill resulted from an explosion of the Deepwater Horizon rig in April 2010

(NEW ORLEANS) — Officials in Florida, Alabama, Mississippi and Louisiana have announced an $18.7 billion settlement with BP that resolves years of litigation over the 2010 Gulf of Mexico oil spill.

Thursday’s settlement announcement comes as a federal judge was preparing to rule on how much BP owed in federal Clean Water Act penalties after well over 125 million gallons of oil spewed into the Gulf.

BP has said its spill-related costs already exceed $42 billion — even without the Clean Water Act fine. It’s also unclear how much BP will end up paying under a 2012 settlement with individuals and businesses claiming spill-related losses.

The spill resulted from the April 20, 2010, explosion of the Deepwater Horizon rig, which killed 11 workers.

TIME Environment

Questions Remain Over U.S. Preparedness for the Next Oil Spill

Eleven People Missing After Explosion At Offshore Drilling Rig
U.S. Coast Guard Fire boats battle a fire at the off shore oil rig Deepwater Horizon.

Despite more frequent drilling, environmental activists say not enough has changed in the way the government oversees deepwater drilling.

In the midst of 2010 Deepwater Horizon oil spill, President Barack Obama’s administration declared a six-month moratorium on deepwater oil drilling. The spill was one of the country’s most devastating environmental disasters, and the freeze was intended to give the federal government time to assess what safety measures it had in place. But the moratorium passed, and drilling quickly resumed.

Now, five years later, offshore oil drilling is more frequent and is done to even greater depth. Since the BP spill, the federal government has approved more than 20 ultra-deepwater drilling expeditions, according to the Associated Press. Environmental activists say not enough has changed in the way the federal government oversees the deepwater drilling.

“The BP spill happened five years ago, but the next offshore oil disaster is still just one mistake away because the oil companies have fought putting the strongest possible protections on the books,” said Senator Edward Markey, a Massachusetts Democrat, in a statement.

Since 2010, the federal government has addressed the causes of the spill by heightening standards for the design and casing of deep-sea oil wells and nearly doubling the number of inspectors. Earlier this month, the Obama administration proposed increasing regulation of the blowout preventer, the last line of defense in preventing a spill. The blowout preventer failed in the Deepwater Horizon accident, one of the many factors

“A lot has occurred to make offshore drilling safer,” said Eileen P. Angelico, a spokesperson for the Bureau of Safety and Environmental Enforcement (BSEE), an agency created to monitor offshore drilling after the BP spill. “Government oversight of drilling has been strengthened…and there has been a significant increase in the number of offshore inspectors and technical experts.”

But environmental activists say the changes aren’t enough. The number of offshore incidents including fires, oil spills and explosions, among other things, has remained high over the past five years, according to data from the BSEE. There were nearly 2,800 incidents and 11 deaths between 2011 and 2014. There were 3,200 incidents and 32 deaths in the previous four-year period. More importantly, environmental activists say, many spills go unreported.

“The industry has destroyed hundreds of square miles of sensitive wetlands, while daily, and often unreported, leaks and spills pose serious threats to our fisheries, wildlife and natural habitat,” said Jonathan Henderson, who monitors field operations at Gulf Restoration Network, in a statement.

At the same time, oil companies have launched operations drilling at depths far greater than the 13,000 feet below sea level where the 2010 spill occurred, according to the Associated Press. Stopping a spill in the deeper and more complex wells would be far more difficult than it was to stop the BP spill—which eventually spewed an estimated 176 million gallons of oil into the Gulf.

But even if tougher regulations were able to prevent all potential oil spills, many environmental activists—and some officials in the federal government—argue that offshore drilling still needs to end. Drilling only deepens reliance on the fossil fuels that cause climate change, experts say. Indeed, Obama used the Deepwater Horizon debacle in 2010 as an opportunity to advocate for the “transition to clean energy.”

“There are costs associated with this transition,” said Obama at the time. “We can’t afford not to change how we produce and use energy—because the long-term costs to our economy, our national security, and our environment are far greater.”

Despite the environmentally friendly gesture, environmental activists say the president’s energy policy leaves much to be desired. The White House is pushing to open new areas to offshore drilling in the Atlantic Ocean.

“Atlantic and Arctic waters need to be taken completely off the table to oil and gas drilling,” said Natural Resources Defense Council Executive Director Peter Lehner in a statement at the time. “All offshore drilling is risky, but the worst thing we could do right now is open up new, never-spoiled, or long-closed areas to the risks this industry poses.”

MONEY Investing

Why Big Oil Can Withstand Cheap Oil Prices

BP gas station with rainbow in the background
Toby Melville—Reuters

What investors need to know about the recent struggles of the petro-behemoths

The price of oil dropped dramatically in the second half of last year, resulting in less-than-stellar earnings for some of the world’s biggest energy companies. Exxon Mobil, BP, and Royal Dutch Shell all recently produced underwhelming fourth-quarter results thanks to lower demand for, and excess supply of, oil.

Despite recent struggles, investors have not jumped ship, and the petro-behemoths have outpaced the broader stock market over the past week. What’s going on, and what does this mean for you?

Oil Companies Have Lots of Money

The last three months of 2014 were not pretty for oil producers. The value of a barrel of oil hit around $115 in June, fell to $55 by the end of the year, and recently dropped to $45 before rebounding in the last couple of days. Exxon’s revenue dropped 21%, BP posted a replacement-cost loss (which is akin to net income) of $969 million, and Shell only saw gains thanks to ancillary businesses.

Despite the recent price uptick, oil’s outlook isn’t much better. The U.S. Energy Information Administration expects the price of oil to average $58 a barrel in 2015, compared to $109 just a few years ago. Lower oil prices simply makes it harder for major energy conglomerates to make money.

Fortunately for executives in Irving, Texas, London, and The Hague, however, large integrated oil and gas companies tend to have a lot of capital to soften these blows. Even after enduring a rough quarter, Exxon has nearly $5 billion in cash on hand, BP earned more than $12 billion for all of 2014, and Shell took in about $45 billion in cash flow last year.

Oil Companies Have Other Businesses

While cheaper oil makes the act of getting the black stuff out of the ground less profitable, other businesses in these large oil companies actually stand to benefit from lower oil prices. Exxon’s chemical operations, for example, actually saw a 35% increase in earnings over the same period in 2013.

“Our chemical business is very well positioned to take advantage of the lower commodity prices,” says Exxon’s head of investor relations Jeff Woodbury in the most recent earnings call. “Particularly in the U.S. our manufacturing sites are highly flexible and can run across a wide range of feedstocks, from ethane all the way to gas oil.”

It’s About Expectations

Falling energy prices was one of the biggest stories at the end of last year. Americans are feeling better about their own financial situation; cheaper prices at the pump feel to them like a pay raise or a tax cut. Which is to say, the market was not shocked that large oil companies had muted earnings during the last three months of 2014. In fact over the past six months shares of Exxon, BP, and Shell have fallen 6.7%, 16.2% and 17.6%, respectively. (The S&P 500, over the same period of time, has actually jumped 6.5%.)

OIL

And oil executives are doing all they can to lower costs and expectations for the near future. BP announced that it will be spending $4 to $6 billion less in capital expenditures in 2015 than it originally thought, and about $3 billion less than the company spent last year.“We have now entered a new and challenging phase of low oil prices through the near and medium term,” BP chief executive Bob Dudley said in a press release. Shell has also announced that it will reduce costs next year, and expects to spend $15 billion less through 2017.

What Does This Mean for You

Investors still pay a premium to own big oil stocks. Forward-looking price-to-earnings ratio for Exxon, BP, and Shell all exceed that of the S&P 500.

But they still look relatively attractive to USAA fund manager Bob Landry. Oil prices may not rebound this year, he says, but they’ve probably hit a floor at around $40 a barrel. “If you’re a long-term investor you can hold some of these companies that pay a solid dividend, and pick up shares for cheaper than what they were four-to-six months ago,” Landry says. “These companies can survive this turmoil thanks to a fortress balance sheet and the ability to generate significant cash flow.”

TIME Environment

BP’s Oil Spill Fines Reduced by Billions

Plaquemines Parish Coastal Zone Director Hahan holds a tri-colored heron after spotting the seriously oiled bird along Queen Bess Island near Grand Isle,
Sean Gardner—Reuters Plaquemines Parish Coastal Zone Director P. J. Hahan holds a tri-colored heron after spotting the seriously oiled bird along Queen Bess Island near Grand Isle, Louisiana July 17, 2010. The BP oil spill has been called one of the largest environmental disasters in American history.

The maximum penalty is down to $13.7 billion

A federal judge ruled on Thursday that BP’s maximum fine for the 2010 oil spill in the Gulf of Mexico will be $13.7 billion, far lower than the previous estimate of $17.6 billion.

Federal magistrate Carl Barbier found that only 3.19 million barrels had been spilled into the ocean, compared with the government’s estimate of 4.09 million.

The third phase of BP’s non-jury trial begins Tuesday, when lawyers will argue over the exact fine per barrel. After that point, the actual fine will be assigned.

[Reuters]

TIME Environment

Judge Places Most Blame on BP for 2010 Oil Spill

Deepwater Horizon site
Carrie Vonderhaar—Ocean Futures Society/Getty Images Deepwater Horizon site

British energy giant's conduct called "reckless"

A New Orleans judge ruled on Thursday that British energy giant BP’s gross negligence led to the largest offshore oil spill in American history.

U.S. District Judge Carl Barbier said BP was mostly to blame for the 2010 Gulf of Mexico disaster, which killed 11 people and spewed oil into the water for 87 days.

Barbier attributed 67% of the fault to BP, 30% to Transocean, which owned the Deepwater Horizon drilling rig, and 3% to Halliburton, the cement contractor.

“BP’s conduct was reckless,” Barbier wrote in the decision, according to Bloomberg. “Transocean’s conduct was negligent. Halliburton’s conduct was negligent.”

Barbier oversaw a trial last year to distribute fault for the spill. BP could face up to $18 billion in fines, Bloomberg reports, though appeals will likely delay if and when any penalties are settled. The company pleaded guilty in 2012 to 14 federal counts and agreed to pay $4 billion to end the criminal case.

BP said in a statement it would appeal the decision. Its shares were down nearly 6% at 12:12 p.m. ET on Thursday.

TIME Companies

Halliburton to Pay $1.1 Billion Over Gulf of Mexico Oil Spill

Flags flying at a Halliburton facility in Williston, North Dakota on Aug. 20, 2013.
Karen Blieber—AFP/Getty Images Flags flying at a Halliburton facility in Williston, North Dakota on Aug. 20, 2013.

The deal will pay off damage claims from property holders and commercial fisheries affected by the Deepwater Horizon disaster

Halliburton has reached a $1.1 billion settlement deal with plaintiffs claiming damages resulting from the Deepwater Horizon oil spill of 2010, the Houston-based energy company announced on Tuesday.

The company will pay $1.1 billion into a trust in three installments, which will be used to pay off damage claims from property holders and commercial fisheries along the gulf coast.

The deal removes a measure of uncertainty that has lingered over the company’s legal reserves over the past four years. Halliburton has set aside a $1.3 billion litigation fund for costs related to the spill. While the settlement resolves claims from individual plaintiffs, Halliburton still faces lawsuits from several coastal states.

Halliburton has traded blame with British Petroleum (BP) over the explosion of the Deepwater Horizon drilling rig, which unleashed nearly 5 million barrels of crude into the Gulf over several weeks in 2010, one of the largest offshore oil spills in U.S. history.

BP, the owner of the well, blamed Halliburton for faulty construction work while Halliburton said BP’s faulty management was responsible. Both companies, along with the owner of the rig, Transocean Ltd., have paid out billions in settlement deals.

TIME leadership

One of the Most Powerful CEOs on Earth Was Afraid to Come Out of the Closet. Until Now

BP Chief Resigns Over Gay Affair
Peter Macdiarmid—Getty Images Former Chief Executive of British Petroleum Lord Browne

Here’s how companies can encourage a culture of openness

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

Over the course of my career at BP, from trainee to chief executive, I was frequently asked whether I had a girlfriend or whether I was married. People assumed that I was a bachelor who had not yet met the right woman. It was a fair assumption, for an obvious reason: Most people are straight. But for those who remain in the closet, the assumption of heterosexuality can be highly damaging. It reinforces their feeling that being gay is something out of the ordinary, something that would put them at a disadvantage in their personal and professional lives, and something that is probably best kept hidden.

The assumption of heterosexuality is one of the reasons that many people in business and in other sectors continue to lead hidden lives. I have spent the past 18 months conducting interviews for my book, The Glass Closet: Why Coming Out Is Good Business, about the risks and rewards of coming out in business. I encountered men and women who, despite living in an age of diversity targets, lesbian, gay, bisexual and transgender corporate networks and equal marriage, are still afraid of the consequences of coming out. Young executives in their 20’s should be free of the fears that plagued me for over 40 years, but the evidence suggests that many of them are not.

Through four decades at BP, I kept my private life separate from my business life. As a young professional in the oil industry, my career was going in the right direction, and I saw absolutely no purpose in coming out. The corporate ladder was slippery enough on its own, without complicating things by throwing oil on the rungs. By the time I was chief executive, I was worried that any disclosure would damage critical business relationships, particularly those in the Middle East. In countries where homosexuality is illegal, my public profile probably would have protected me, but my sexuality could have had unknown and unlimited consequences on BP’s businesses.

For the rest of the story, got to Fortune.com.

TIME Environment

A BP Employee Convicted of Deleting Deepwater Texts Gets a New Trial

Kurt Mix
Gerald Herbert—AP Kurt Mix, left, leaves Federal Court with an unidentified member of his defense team in New Orleans on Dec. 18, 2013.

A judge rules that the original verdict was compromised by remarks overheard by the jury forewoman

A U.S. District Judge has thrown out the original verdict, and ordered a new trial, in the case of a BP employee convicted of deleting text messages to obstruct an investigation into the Deepwater Horizon oil spill.

Engineer Kurt Mix, 52, of Katy, Texas, was convicted of obstruction of justice for, prosecutors said, deleting text messages between a supervisor and a contractor with the aim of thwarting a grand jury investigation into the disaster. But Judge Stanwood Duval tossed out that verdict, ruling that it had been compromised by remarks the jury forewoman overheard outside the jury room.

Mix denies he was attempting to conceal evidence. He is one of four BP employees charged in connection with the 2010 spill.

[WDSU]

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