Reuters: Hot Stocks: UPDATE 2-BP's spill compensation payouts leap in second quarter

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UPDATE 2-BP's spill compensation payouts leap in second quarter Jul 30th 2013, 07:55 Tue Jul 30, 2013 3:55am EDT (Adds share price, analyst comment, background, sees lower q3 output) By Andrew Callus LONDON, July 30 (Reuters) - BP Plc's $20 billion Gulf of Mexico oil spill trust fund has almost run out after provisions for compensation costs so far leaped by $1.4 billion in the second quarter. The British oil company has just $300 million left in the fund and the deadline to claim for losses by Gulf coast businesses - which make up the bulk of claims for the 2010 spill - is not until April next year. BP has said claims beyond what the fund can pay will be taken straight off future profits. Its shares fell 2.8 percent in early trade. The company revealed the extra cost in its second-quarter results, which missed profit forecasts due to the lagging effect of tax in Russia, where the price of Urals crude was weaker, and due to the tax effects of a stronger dollar on a basket of currencies. Adjusted net profit for the quarter reached $2.71 billion compared with expectations of $3.41 billion and with $3.6 billion a year ago. Profit was also hit by lower prices and by lower production - partly the result of asset sales to pay the costs of the spill, which killed 11 men and despoiled the Gulf of Mexico coastline. The extra $1.4 billion of spill compensation costs come on top of a $500 million addition in the first quarter and bring BP's estimate of the cost of compensation claims so far to $9.6 billion. Some $900 million is for extra claims, while about $500 million is for the costs of the claims administrator, BP said. BP is locked in a legal battle over the compensation payouts with the administrator, Patrick Juneau. It says Juneau is paying out "fictitious" and "absurd" claims due to a misinterpretation of the settlement. But so far it has lost all its court battles and appeals to stop the payouts. WELL SAFETY Last week, though, its legal campaign appeared to receive a boost when Halliburton, which was involved in preparing the doomed Macondo well for production, abandoned one of its arguments that tried to paint the British oil company as unconcerned about well safety. BP also faces a resumption of its trial on civil charges in September. It increased its overall provision for the cleanup, fines and compensation for the spill to $42.4 billion from $42.2 billion. Analysts expect BP's final bill to be billions bigger. The quarterly result was the first to include a contribution from its 19.75 percent stake in Rosneft, the state-controlled Russian company, which BP acquired in part-exchange for its 50 percent holding in Russian oil group TNK-BP. Analysts had expected a bigger contribution from the Rosneft stake. They said the tax-lag factor and the impact of a weaker rouble looked to have accounted for about $450 million of the $700 million shortfall. A broader tax and currency effect of a stronger dollar on a basket of currencies, that raised the company's tax rate to 45 percent from 35 percent normally, accounted for the remainder. "I think people will have to listen to what BP's got to say on that (Russia) and try to digest how to forecast it going forward," said Santander analyst Jason Kenney. "The 45 percent tax rate also a bit of a surprise ... they're saying a stronger U.S. dollar versus a basket of currencies, but we've not seen this kind of swing in effective tax rates before. "The core upstream division was actually ahead of consensus and that's still going great guns. The refining and marketing division is probably as expected," Kenney said. "Fundamentally, I think BP's still moving forward." Underlying production of oil and gas excluding Russia - adjusted for the impact of divestments and production-sharing agreement effects - grew by 4.4 percent compared with the same period last year, as production from major projects in Angola and Norway ramped up. Upstream production in the third quarter is expected to be lower as a result of planned seasonal turnaround activity and continuing divestment impacts, partly offset by increasing production from new projects, BP said. (Editing by Sarah Young and David Holmes) Link this Share this Digg this Email Reprints

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