BP braces for huge annual loss after oil spill crisis

1st February 2011, Comments 0 comments

British oil giant BP is forecast to post its first annual loss in almost 20 years on Tuesday as the group struggles to cope with the aftermath of the devastating Gulf of Mexico oil disaster.

BP, which publishes its official results at 0700 GMT, might update its cost of last year's fatal oil spill catastrophe, which currently stands at about 40 billion dollars (29.2 billion euros).

The Gulf of Mexico oil disaster was triggered by a blast on the Deepwater Horizon rig -- leased by BP and operated by Transocean Energy -- that killed 11 workers on April 20.

The broken well was eventually plugged but not before it gushed about 4.9 million barrels of oil into the Gulf waters.

The spill destroyed hundreds of miles of fragile coastlines and caused BP's share price to collapse while its reputation in the United States took a hammering.

The disaster also forced the resignation of chief executive Tony Hayward and led BP to announce that it was selling assets worth up to 30 billion dollars.

New chief executive Bob Dudley is expected to announce the resumption of BP's dividend, a welcome development for pension holders and investors given the stock previously accounted for a huge chunk of investments in Britain.

But analysts and investors will also be watching closely for an update on the company's strategic overhaul.

Dudley has said the firm is on a "journey to re-establish trust in BP around the world -- especially the US".

"Of all the oil majors reporting this quarter, the actual financial results will be less important than the rhetoric and strategic guidance from management," Dublin-based Dolmen Stockbrokers said in a note to clients.

Facing a massive compensation bill for the Gulf of Mexico spill, BP has managed to recoup around 20 billion dollars by offloading interests in Argentina, North America, Egypt, Venezuela, Vietnam and Colombia.

It has been helped by a gradual but steady increase in oil prices, which surged past $100 per barrel on Monday for the first time since 2008 on worries about the impact of Egyptian unrest on global crude supplies.

But BP's production is likely to be 10 percent lower than a year earlier, due to the impact of a US drilling moratorium and asset disposals following the disaster, while extended maintenance periods will also affect output.

Seeking to bounce back, BP announced in January that it will form a joint venture for Arctic oil exploration with Rosneft and take a cross-shareholding, in one of the biggest ever tie-ups between a Russian and Western company.

But the deal is not straightforward. Russian shareholders in BP's other Russian joint venture, TNK-BP, have filed a complaint with a London court seeking to block the transaction, while environmental groups have slammed the proposed deal.

BP's fierce rival Royal Dutch Shell, meanwhile, will publish its annual earnings on Thursday.

© 2011 AFP

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