Texas incident prevents BP reporting record profits

BP, the second biggest oil company in the world when figured by market capitalization, announced on Tuesday that its replacement cost net profit in the second quarter amounted to $4.981 billion, up 29 percent from the same quarter last year, mostly due to higher oil prices but with an additional boost from higher oil and gas production.

BP’s output was up by 3.5 percent on the year to an equivalent of 4.11 million barrels per day.

However, an explosion at BP’s oil refinery in Texas City, Texas in March that resulted in 15 deaths and injuries to 170 cost the company close to $1 billion, $700 million of which were due to death benefits and personal injury claims resulting from the blast.

None of the cost was covered by insurance. Additionally, damage to its Thunder Horse drilling platform in the Gulf of Mexico by Hurricane Dennis will mean a delay of up to six months in the start-up of that facility.

Both incidents combined to prevent the company from claiming record profits. Even higher dividends, up from 8.5 cents to 8.925 cents per share, and a speed-up in BP’s buyback of shares could not compensate for the bad news, and BP’s shares had lost 0.89 percent by early afternoon to 637p.