BP Plc Raises Deepwater Horizon Compensation Estimate To $9.6bn

Underlying profits in the second quarter were significantly less than expected at BP plc (LON:BP).

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Shares in BP (LSE: BP) (NYSE: BP.US) fell over 3% in early trade this morning, as the oil major warned that compensation is set to exceed £27.6bn ($42.2bn) for the Deepwater Horizon disaster.

An extra £912m ($1.4bn) has been set aside for the oil-spill fund, as it raised its estimate of compensation claims to $9.6bn. But even if it wins the legal battle it’s currently embroiled in, management warned “the total cost of the PSC settlement will nevertheless be significantly higher than the current estimate of $9.6 billion because the current estimate does not reflect business economic loss claims not yet received or not yet processed“.

Elsewhere in this morning’s Q2 and half-year results, underlying profit came in at $2.7bn in the quarter — significantly less than analysts’ forecasts of $3.4bn. The first-half figure of $6.93bn was reduced from $8.2bn in the comparative half last year. Management blamed lower oil prices, higher taxes and a reduced income from its Russian operations — driven by rouble depreciation — for the lower-than-expected figures.

The news drove the shares down to their lowest price in more than a month, and with the legal wranglings still ongoing, it would take an extremely contrarian investor to be interested in BP right now, despite that enticing yield of more than 5%.

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> Sam does not own shares in BP.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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