BP Oil Spill Cost Hits $40 Billion, Company Returns To Profit
Energi ; BILOXI, Miss. — BP PLC is once again reporting profits even with an estimated $40 billion price tag for the response to its blown out well in the Gulf of Mexico.
In this waterfront city, where many lost their livelihoods to the summer of oil, a mixture of relief and melancholy greeted the news Tuesday. A financially healthy BP means jobs and compensation, but residents still reeling from the worst offshore oil spill in U.S. history are waiting for some good news of their own.
BP said that costs related to the April 20 oil spill dragged down its third-quarter profit by more than 60 percent. The London-based company earned $1.79 billion from July through September, compared with $5.3 billion a year earlier. But the fact that BP returned to profits at all, coming after a loss of $17.2 billion in the second quarter, indicated the company’s operations remain solid despite the spill.
“That’s real good news they’re making money because at least we know they have the ability to pay us over a long period of time because we’ve still got a lot of problems,” said shrimp processor Rudy Lesso, whose Biloxi, Miss. business is down about 25 percent because much of the public is still afraid to eat Gulf seafood.
BP Oil has set up a $20 billion compensation fund to pay victims of the oil spill, cutting roughly $1.7 billion in checks so far. But the process has been slow and cumbersome for struggling Gulf coast residents.
BP’s third-quarter performance fell well short of the industry norm. All the other major oil companies, except Chevron, have reported stronger third quarter profits thanks to higher oil and gas prices.
The company’s $40 billion estimate for its overall spill response was $7.7 billion higher than its previous estimate provided during its second-quarter results released this summer, largely due to unanticipated additional expenses. The company had already spent $11.2 billion responding to the spill by the end of September.
None of that, however, kept BP Chief Executive Bob Dudley from delivering a rosy prognosis.
“What I can report today is that BP is now in recovery mode,” Dudley said Tuesday from London.
At one point he talked about how the situation looks without the spill – an unthinkable leap for Gulf residents.
“Putting aside the incident … the BP group as a whole delivered a strong business performance throughout the quarter in terms of both financial and safety performance,” he added.
Ewell Smith, head of the Louisiana Seafood Promotion and Marketing Board, said people forget that oil and fishing have for decades “worked side by side” in the Gulf region.
“People lose sight that our fishing communities and our oil and gas communities are tied together at the hip. They both need to stay strong to keep our economy strong,” he said. “So it’s good news that BP is recovering financially.”
BP just Monday announced it would spend $78 million to test and promote Louisiana seafood, and boost tourism in the state.
“They made a commitment to us to help us rebuild our brand,” Smith said. “We want them to be around long enough to live up to that.”
The National Oceanic and Atmospheric Administration has reopened most federal waters in the Gulf of Mexico to commercial fishing, leaving just about four percent still closed. At the height of the spill, about 37 percent of federal waters in the Gulf were closed.
But fishermen, shrimpers, crabbers and oystermen are finding little demand from a wary public, despite the federal government’s insistence that all seafood being caught in newly opened waters is safe to eat.
“I have personally the utmost confidence in the safety of the seafood that is available to the American consumer coming from the Gulf,” U.S. Commerce Secretary Gary Locke said during a recent visit to a federal seafood testing lab in Mississippi. “We’re not trying to hide anything.”
But those words bring little comfort to people like Lesso, who’s got a freezer full of shrimp he can’t sell.
“Buyers don’t have to take domestic shrimp anymore. They can buy imports all day long at cheaper prices so why would they take a chance on hurting their customers in restaurants?” Lesso said. “It’s very difficult for us.”
Tourism, too, took a huge hit, and the industry remains sullied by the same image problem.
Danielle Yarbrough, who owned Smokey Blues Bar B Que restaurant in Orange Beach, Ala., had to shut down her business in August because tourists weren’t coming.
She said she received some compensation from BP, but it was too late.
“I feel like they did what they said they were going to do, but we lost the business,” she said.
For his part, BP’s Dudley said the company was committed to operating in the Gulf of Mexico following the lifting of a U.S. government moratorium on drilling after the spill. But he said the company would “step back” and look at its equipment and rigs in those waters before attempting to jump back in.
The company’s exploratory Macondo well in the Gulf blew out on April 20, killing 11 workers and spewing more than 170 million gallons of oil into the sea. Crude kept gushing until July 15, but it took BP until Sept. 19 to completely seal the well.
Dudley has been working to rebuild BP’s shattered reputation, particularly in the United States, and turn around a 35 percent rout in the company’s share price since the Gulf explosion. And the company still faces billions of dollars in fines.
Plaquemines Parish President Billy Nungesser, who presides over a southern Louisiana region where marshes and estuaries were swamped by BP’s crude, said he just wants BP to stay the course.
“We’ve never wanted BP Oil to fail. We just want them to do the right thing,” Nungesser said. “We hope they make a lot of money and reinvest it in the communities that have been hardest hit.”