HOUSTON — Less than two years ago, the British oil company BP was worried about its very survival as a seemingly unstoppable oil spill in the Gulf of Mexico threatened to destroy its finances and reputation.þþþBut on Tuesday, BP expressed renewed confidence in its future, reporting strong quarterly profits and raising its dividend to shareholders. The company also said it was eager to resolve billions of dollars in remaining private and government claims from the accident, whether through a settlement or in a trial scheduled to begin Feb. 27 in New Orleans.þþThe explosion of the Deepwater Horizon drilling rig in April 2010, which killed 11 workers and spilled millions of barrels of crude oil into the gulf, was the most serious environmental disaster involving the oil and gas industry in the United States since the Exxon Valdez oil tanker struck a reef in Alaskan waters in 1989. BP was forced to revamp its senior management and safety procedures in order to regain its footing with international regulators and the public, and oil analysts say the company’s reputation will be damaged for years to come.þþOn Tuesday, Robert W. Dudley, BP’s chief executive, told reporters in London that BP was “on the right path” as the company reported $7.7 billion in profit for the fourth quarter of 2011, a 38 percent increase from a year earlier. BP said production was up substantially from the previous quarter, and it expected its cash flow by 2014 to surge 50 percent past that of 2011, giving the company the financial strength to invest in exploration and pay even higher dividends.þþBP is a much smaller company than it was before the accident, having sold $30 billion, or about 20 percent, of its assets to pay for costs and claims related to the accident. Its stock price is still well below where it was before the accident.þþBut its profit for each barrel of oil is comparable to other major oil companies, according to Fadel Gheit, a senior oil analyst at Oppenheimer & Company. “BP is here to stay,” he said.þþStill, BP has not yet been able to put the spill behind it. The company faces possible criminal charges in the accident, billions of dollars in pollution fines and claims from people and businesses that have rejected settlements from the $20 billion claims fund set up by the company.þþOn Feb. 27, United States District Judge Carl J. Barbier is scheduled to begin hearing a group of cases brought by a range of plaintiffs that includes individuals, businesses, states and the federal government. The civil lawsuits involve everything from income lost by individuals to civil penalties under federal environmental laws.þþ“We are prepared to settle if we can do so on fair and reasonable terms,” Mr. Dudley said on Tuesday. “But equally, if this is not possible, we are preparing vigorously for trial.”þþThe hearing, which begins the Monday after Mardi Gras, will focus on placing the blame for the blast, and will include an examination of the events leading up to the explosion and sinking of the oil rig.þþThe second phase could begin this summer, and will deal with what happened after the spill began, assessing the efforts to seal the well and trying to determine how much oil escaped from the well before it was finally capped in July 2010.þþThe government has estimated that 4.9 million barrels of oil have leaked into the gulf, but the final number will be critical in figuring out federal penalties under the Clean Water Act, which start at $1,100 per barrel of oil released but can rise to $4,300 a barrel if the court finds gross negligence.þþA third phase will go into questions of environmental damage related to the cleanup effort, including the effects of burning the oil and the use of dispersants. The litigation is expected to stretch into 2013.þþBecause there is so much uncertainty and financial risk in the litigation, “there’s enormous pressure on BP to settle with the government,” said David M. Uhlmann, who headed the Justice Department’s environmental crimes section under Presidents Bill Clinton and George W. Bush.þþSettlement negotiations have been going on between BP, federal and state officials and plaintiffs’ attorneys. Alabama’s attorney general, Luther Strange, said in a recent interview that he was not opposed to a settlement, “as long as Alabama is made whole, both the state and the citizens.”þþMany oil experts say that a settlement was made more likely by recent court rulings that limited the liability of Transocean, the operator of the rig that exploded, and Halliburton, the company that cemented the deepwater well that blew out and caused the spill.þþþBP has put aside $41 billion to cover costs related to the spill, including the $20 billion trust fund for claims that has been administered by Kenneth R. Feinberg, an outside lawyer. BP said it has so far paid out $7.8 billion to individuals and businesses affected by the disaster. The company is in the process of selling assets worth $38 billion to raise cash for claims and said it intends to complete payments to the trust fund this year.þþMr. Gheit, the oil analyst, said he was confident BP has the money in hand to settle all the claims — assuming the company is not found grossly negligent. “If they are, the penalties will take them above and beyond the original estimate of $41 billion,” he said.þþBP’s executives apparently feel confident enough about the company’s finances to raise the quarterly dividend by 14 percent to 8 cents a share, the first increase since it resumed payouts to shareholders a year ago.þþ“The dividend is still far from the historical heady heights,” Richard Hunter, head of equities at Hargreaves Lansdown, said in an e-mail. “More positively, the fund put aside to finance these claims seems sufficient, whilst further planned divestments will enable BP to focus more strategically on higher growth opportunities.”þþTo repair its tattered image, BP has been investing heavily in television and print advertising since late December to give the public a “progress report,” complete with scenes of crowded beaches and flying coastal birds, suggesting that the gulf is returning to normal and the company is readily paying “all legitimate cleanup costs.” The company is also planning a marketing campaign over the next two years, with an expected cost of several hundred million dollars, to improve sales at BP gas stations.þþMost important for its long-term prospects, BP is pressing forward with new exploration projects, including in the deep waters of the Gulf of Mexico. It has five rigs drilling there now, the same number as before the accident, and it plans to operate eight rigs there by the end of the year.þþIt is drilling one well in the Kaskida field that, if successful, could dwarf the production of any of its previous gulf wells.þþ“The gulf remains a very important part of our future,” Mr. Dudley said, adding that he expected production growth to return by 2013. “Our belief has always been that it’s better to cooperate and try to restore the Gulf Coast, because that’s where we want to operate.”þ
Source: NY Times
