Disaster clouds BP profits boost

published 30 April 2010

Oil giant BP exceeded analysts' expectations this week with a 135% year-on-year jump in first-quarter after-tax profits to $5.6bn on a 55% increase in revenues to $74bn. This was due largely to the near-doubling of the oil price between last year's first quarter and this year's.

But the news was overshadowed by last week's explosion of an offshore rig, which killed 11 people. Around 1,000 barrels of oil are leaking into the sea every day and have created an 80- by 50-mile slick. The cost of the clean-up is expected to be around $200m-$300m, although litigation may well drive the total higher.

BP "has pulled out all the stops" on the clean-up, said Sheila McNulty on FT.com. More than 1,000 people have been sent to help and 49 response vessels are in operation, along with five aircraft. CEO Tony Hayward's aggressive response is no surprise, said James Herron on WSJ.com. He took over the company three years ago after "a string of safety failings", including an explosion at a refinery that left 15 dead. Having "turned the company around" in this respect he's now doing his best to shore up BP's image.

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There's another reason for BP to engage in maximal damage control, said Fiona Maharg-Bravo on Breakingviews. The explosion "gives ammunition" to anti-oil environmentalists just as the American administration is set to expand offshore drilling. Still, this incident isn't likely to stop deepwater drilling, a confident BP insider told The Daily Telegraph. "It's obvious that the world needs this stuff" and "there are very few companies qualified to extract it".

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