Oil Spill Settlement Leads BP Profit to Drop Nearly 80 Percent
BP reported that its net profit dropped to $1.62 billion for the three months ended Dec. 31, down from $7.69 billion in the same period a year ago. BP took a loss of $3.85 billion to settle all spill-related federal criminal charges with the U.S. government. Underlying replacement cost profit for the period -- which strips out changes in the value of inventories -- was down 20 percent at $3.98 billion, according to the Associated Press.
BP settled with the U.S. Department of Justice, agreeing to pay a total of $4.5 billion in penalties and plead guilty to felony misconduct for the April 2010 Deepwater Horizon disaster. As CSNews Online previously reported, the deal brought an end to the criminal end of the case, but civil claims remain. The London-based oil giant could pay billions more in damages for the disaster.
Despite the drag on profit, BP's 2012 fourth quarter surpassed analysts' predictions, and the company said its downstream activities – the refining and sale of petroleum products -- earned a record amount for the year, the AP reported. BP Chief Executive Bob Dudley said in a statement that the result "lays a solid foundation for growth into the long term."
"We will continue to see the impact of this reshaping work in our reported results in 2013," Dudley said. "By 2014, I expect the underlying financial momentum to be strongly evident."
The company's spill-related expenses total more than $24 billion to date and BP has estimated that it will pay a total of $42 billion to fully resolve its liability for the disaster. At a court hearing last month, U.S. District Judge Sarah Vance described the criminal settlement as "just punishment" for BP.
Now, billions of dollars more are at stake under the civil trial, which is set to start Feb. 25. The outcome will depend on whether the judge rules the company acted with gross negligence; BP says it wasn't grossly negligent. The trial is designed to identify the causes of BP's well blowout. The first part of the trial is also intended to proportion blame among BP and its partners in the Deepwater Horizon project.
During the recent earnings call to discuss the company’s fourth-quarter results, Dudley repeatedly declined to answer questions from analysts as to whether a settlement was possible ahead of the civil trial.