Gulf disaster to loom over BP earnings

Marion Dakers
OIL giant BP is expected to trail behind its peers when it posts third quarter results tomorrow, with the effects of the Gulf of Mexico spill set to dominate the firm’s results and future plans.

Consensus forecasts predict replacement cost profit, which strips out changes in oil prices, of $4.6bn (£2.8bn) for the three months to September. The firm made $4.98bn in the same period last year, and more than $10bn in 2008.

Rival firm Shell posted a forecast-beating 17.7 per cent jump in replacement cost profit last week, despite taking a hit on its own operations in the Gulf.

BP is expected to announce its latest bill for cleaning up the Deepwater Horizon disaster since April. The spill led to a six month ban on deepwater drilling in the region.

The firm put aside $20bn to deal with hundreds of expected compensation claims, sending BP into the red for the first time in 18 years in June.

Long-suffering investors will look to new chief executive Bob Dudley, who took over from Tony Hayward at the start of October, to reveal when the firm expects to resume dividends.

The company has suggested that dividends will return in early 2011. However, analysts have warned BP is unlikely to give any concrete sign of a return to dividend payments.

“The path to rehabilitation post-Macondo and Bob Dudley’s new strategic direction are the key to performance rather than third quarter earnings,” said analysts at Citigroup.

Dudley said the Gulf of Mexico spill had threatened “the very existence” of BP during a speech at the CBI conference last week, but that the firm would continue operations in the US.

He added that the company remains healthy and “underlying operational and financial performance is sound”.

Replacement cost profit: $3.52bn
Change year on year: +17.7 per cent
Effects of Gulf of Mexico: 10,000 barrels of oil equivalent per day lost to date

Underlying pre-tax profit: $7.35 billion
Change year on year: +55 per cent
Effects of Gulf of Mexico: none mentioned; production rose 20 per cent in the last three months

(estimates) Replacement cost profit: $4.6bn
Change year on year: -7.6 per cent
Effects of Gulf of Mexico to date: $11.2bn cost; shares now trading at two-thirds of their value before the spill