A year after the Gulf of Mexico oil spill, BP binds up its wounds and plans for the future.
Queen Elizabeth II famously called 1992 her annus horribilis in her Christmas speech that year. Oil giant BP may well look back on the last 12 months with the same sentiment.Since the Deepwater Horizon rig exploded on 20 April 2010, killing 11 crew members and spurting millions of gallons of oil into the Gulf of Mexico, the company has been fighting for its survival. The spill, which was eventually capped in September, has cost the company over £25bn and forced the resignation of chief executive Tony Hayward.
In an attempt to steady the ship the company disposed of assets worth £15bn and sought to negotiate a controversial alliance in Russia with Rosneft that drew the ire of its other Russian partnership, TNK-BP.
In April the board had to run the gauntlet of protestors and angry shareholders at its AGM in London. Fishermen from the Gulf, Canadians protesting about BP’s involvement in Canada’s oil sands industry and a group of workers from its bio-ethanol plant in Hull that is scheduled for closure set the backdrop while chairman Carl Henric Svanberg and new chief executive Bob Dudley battled against shareholder unrest inside.
Just two weeks later BP was in front of shareholders again for its first quarter results, where it revealed that Q1 profits had been hit by lower production figures, down 11 per cent, which the company blamed on the on-going drilling moratorium in the Gulf and the sale of assets. Drilling in the Gulf of Mexico is expected to resume later this year.
Despite the fall in production BP reported a 16 per cent rise in first quarter profits as sales of assets outweighed the cost of the spill. Net earnings were £4.4bn, up from £3.8bn, while revenue climbed 18 per cent to £53.9bn.
“Profits have fallen further for BP during Q1 as the cost of the clean-up continues to mount,” said Nick Raynor, investment advisor at The Share Centre. “This fall was expected and is likely to continue into Q2. Until this strategy is completed it is difficult to predict future profit.”
Svanberg admitted that it had been a testing 12 months for the company. “BP has been through a crisis almost unprecedented in corporate history,” he told analysts. “We have learned many lessons from this tragedy. It is our responsibility and our duty to share these lessons with the wider industry,” he said.
He explained that BP was going through a fundamental change with a new mindset that was functionally based rather than asset based. “We are an organisation which has a strengthened safety and operations function,” he said. “This new organisation will drive change in remuneration, values and what it means to work for BP. This is not a simple re-shuffling of the pack of cards.”
And Svanberg pointed to the partnership with Rosneft as vital. “BP has always been good at partnerships, and we are building on that skill through our new associations in Iraq and China and with Rosneft and Reliance,” he said. “In order to meet the ever-growing global demand for energy, Russia is an important place for BP to be. ”