BP’s 2Q profit absorbed in $32B oil spill cost
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TEXT OF INTERVIEW
Bill Radke: The oil leak in the Gulf of Mexico will cost BP $32 billion — that’s what the company said this morning. BP also confirmed Tony Hayward will step down as CEO in October 1 to be replaced by American Bob Dudley. Marketplace’s Stephen Beard joins us live this morning. Hello, Stephen.
Stephen Beard: Hello, BIll.
Radke: You have seen BP’s report this morning. What does that balance sheet look like?
Beard: It looks better than expected. If we close our eyes for a minute and forget about the Gulf of Mexico, the company made an underlying profit: $5 billion in the second quarter. Much more than the same period last year.
Radke: Uh yeah, if only we could forget, Stephen. Unfortunately, BP can’t forget that spill. How big a hit is it to the company’s finances?
Beard: Well it has turned the profit in the second quarter into a huge lose. But still, it’s better than expected; the company has set aside $32 billion to cover all its costs, as you pointed out. That includes the $20 billion it’s already paid into the escrow account. Now BP concedes that number could get higher, but it’s way short of the $100 billion that some doomsayers were predicting. Jason Kenney of the Dutch bank ING says on the basis of today’s numbers and announcements, BP is in fair shape:
Jason Kenney: Taken in context, it’s a positive trading outlook for the company. It reinvigorates the company with a new strategy, a new CEO, and the worst news now in place in the company on a financial basis.
He says BP could, in four or five years’ time, regain its position as Britain’s most valuable company. And it is no longer a takeover company. But — and there’s always a but — this does assume BP’s got that $32 billion cost of the spill correct and that there isn’t another big disaster somewhere else in the BP empire.
Radke: Didn’t think we’d be hearing the words “BP” and “reinvigorated” this morning, Stephen Beard. Thank you.
TEXT OF STORY
Steve Chiotakis: The British oil giant BP has officially set Tony Hayward’s departure date as CEO. He’ll leave the post on October 1. The news came as part of the company’s business earnings report for the past three months. A report that showed the Gulf of Mexico oil spill will cost the company $32 billion. But as the BBC’s Rebecca Singer reports for Marketplace, BP’s put a positive spin on its future business.
Rebecca Singer: The well’s capped and the oil’s dispersing. The perfect time for Hayward to leave, says BO chairman Carl Henric Svanberg, the . He praised Hayward but said it was a mutual decision.
Carl Henric Svanberg: He is realistic and honorable and we all came to the conclusion that in order to rebuild the reputation, in order to rebuild our leadership position we needed fresh leadership.
Svanberg hasn’t come out of this disaster untainted either, after referring to the Gulf Coast residents and business owners as “small people”. But he’s sure he can win back the confidence of the U.S. public.
In its earnings report, BP’s put the price tag for the Gulf leak at $32 billion. And Svanberg admits the final bill could be higher.
Svanberg: It’s of course a huge loss that overshadows everything else, but the underlying performance of the company is actually strong. It continues to be strong, we have strong assets around the world, we have strong cash flow.
Experts warn today that on top of all BP’s other troubles it could be one of the most expensive and drawn-out legal battles in U.S. history.
In London, I’m the BBC’s Rebecca Singer for Marketplace.
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