BP records loss after Gulf of Mexico oil spill.

BP reports �3 billion loss after oil spill

BP suffered its first annual loss in nearly two decades after revealing that the Gulf of Mexico oil spill will cost it more than $40 billion (£25.2 billion).

The British energy giant recorded a full-year loss of $4.9 billion (£3.1 billion) in the year to December 31, compared with profits of $13.9 billion (£8.7 billion) in 2009, after the financial impact of the fatal Deepwater Horizon explosion was deducted.

But chief executive Bob Dudley said the embattled firm would resume its quarterly dividend payment - after it was suspended last summer - at seven cents (4p) a share, half the level of its last payment in April.

The company also revealed plans to sell two refineries in North America - including the company's plant in Texas City, which was the site of a fatal fire and explosion in 2005.

BP reported lower-than-expected profits of $4.4 billion (£2.7 billion) in the fourth quarter. Analysts had forecast around $5 billion (£3.1 billion) for the period.

The full-year results take in one of the most damaging periods of BP's 100-year history, as the devastating explosion on April 20, which killed 11 workers and triggered the biggest offshore oil spill in history, shattered its reputation.

BP once again upped its estimate of the cost of the disaster to $40.9 billion (£25.5 billion) after it took an additional $1.04 billion (£647.8 million) hit in the fourth quarter.

But the company's decision to resume dividend payments is a signal that the firm is recovering and will be welcomed by pension holders as well as investors given the stock previously accounted for an estimated one in every six pension pounds invested.

Mr Dudley said he was determined to see BP emerge as a safer and more trusted company.

He said: "2011 will be a year of recovery and consolidation as we implement the changes we have identified to reduce operational risk and meet our commitments arising from the spill.

"But it will also be a year in which we have the opportunity to reset the company, adjusting the shape of our business, and focus on growing value for shareholders."

BP said it plans to grow the dividend level over time, in line with the "improving circumstances of the company".

BP shares dropped 1 per cent after the results were released but, having fallen from a high of 655p in April to a low of 303p in June, they have steadily climbed back to around 480p.

The company also unveiled plans to reshape its downstream business - the oil and gas operations which take place after the production phase - by concentrating on growth in developing and emerging markets.

As part of the strategy, the company said it would sell two refineries in Texas City, in Texas, and Carson, in California, in the US.

The plant in Texas City was the site of another disaster in 2005, when a fire and explosion killed 15 workers and injured more than 170 others. BP has paid more than $100 million (£62 million) in fines since the incident.

The decision follows a series of upstream - exploration and production - asset disposals in the wake of the Gulf of Mexico disaster.

BP has managed to claw back around $20 billion (£12.6 billion) by selling interests in Argentina, North America, Egypt, Venezuela, Vietnam and Colombia. It said it was on track to meet its target of up to $30 billion (£18 billion).

BP said the ongoing divestment programme, as well as ongoing restrictions in the Gulf of Mexico, would hit its production levels and expects to produce some 3.4 million barrels of oil and gas a day in 2011.

In the fourth quarter, BP said it averaged around 3.67 million barrels of oil and gas a day – 9 per cent lower than the same period in 2009.

But BP said in 2010 it obtained licences to access basins in Brazil, the South China Sea, Indonesia, Azerbaijan and in 2011 Australia and Angola.

It added that in the next six years it plans to start up a total of 32 new projects, expected to contribute an extra one million barrels a day by the end of 2016.

BP lauded its recent £10 billion deal with Russian oil giant Rosneft to form an Arctic exploration alliance.

Analysts expect the Russian deal will help the company recoup some of the losses incurred from asset disposals.

However, BP is embroiled in a legal tussle with shareholders at TNK-BP, another Russian joint venture, who argue that the new deal breaches its shareholder agreement. The dispute will be taken to court in London today.

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