(Dow Jones Newswires), Apr. 27, 2011
BP says it expects to resume drilling in the Gulf of Mexico by the summer, less than 18 months after a rig it had leased there exploded, killing 11 workers and triggering a catastrophic oil spill.
Company officials spoke as BP reported results that showed the repercussions of the Deepwater Horizon disaster continue to weigh on its balance sheet.
Fergus MacLeod, BP's head of investor relations, told analysts that BP is working toward a "phased resumption of activities [in the Gulf] in the middle of the year," subject to regulatory approvals. He said BP would only restart if it could meet or exceed new safety standards, such as tough requirements on oil-spill response capabilities and equipment such as blowout preventers.
A return to the Gulf would mark a big symbolic success for BP chief executive Bob Dudley and his efforts to rebuild a company still badly tarnished by last year's oil spill. BP is the largest producer in the deepwater Gulf of Mexico, one of its main heartlands, and it still owns more acreage there than any other company. But output from its Gulf fields has fallen sharply in the aftermath of the oil spill.
BP's replacement cost profit for the first quarter was $5.5 billion, down 2% from $5.6 billion a year ago and lower than most analysts' forecasts. The metric, which strips out changes in the value of crude inventories, is more closely watched by investors than the net profit figure, which was $7.1 billion in the first quarter, up 17% from $6.1 billion on a year ago.
BP also said it had taken an additional $400 million pretax charge for spill-related costs, bringing its total provision for the spill to $41.3 billion. Last week BP and its contractors on the blownout well, Transocean and Cameron, sued each other over the disaster.
BP's lower replacement cost profit--and the steep 11% drop in its oil and gas production--reflected the continuing impact of Deepwater Horizon. The company has had to sell billions of dollars worth of producing oil fields to cover the costs of the spill. And like other oil companies, its output was badly hit by the drilling moratorium which was imposed by the Obama administration in the wake of the Deepwater Horizon explosion and only lifted last October.
Company officials say its Gulf of Mexico production had declined by 100,000 barrels a day from 433,000 barrels a day last year--a 23% fall. BP's costs have risen, too--partly because of the huge expense of keeping its drilling rigs on standby in the Gulf waiting for the moratorium to be lifted.
Resuming operations in the Gulf has been difficult for all oil companies, not just BP. The new U.S. regulator, the Bureau of Ocean Energy Management, Regulation and Enforcement, BOEMRE, has imposed tough new safety and environmental standards on all operators, which now have to demonstrate how they would contain a subsea blowout.
Since February, BOEMRE has issued permits for the drilling of only ten wells. But allowing BP, which still faces a range of criminal and civil investigations over the Gulf spill, to resume drilling there could prove controversial. The company says it has asked regulators for permission to drill 10 development wells that were underway when the moratorium was imposed.
Copyright (c) 2011 Dow Jones & Company, Inc.
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