Oil giant and pension fund staple BP set aside an extra $1.4 billion for liabilities related to the Deepwater Horizon disaster in the Gulf of Mexico, as it revealed how profits dipped by a quarter during the three months to June.
The company has now committed $9.6bn to compensate individuals and businesses for their losses following the 2010 explosion, with the total set to rise. BP previously budgeted $8.2bn, and before that $7.8bn, to cover the damages.
It also continues to dispute a US court ruling on the settlement agreement it signed following the blow-out. BP argues that it permits businesses to claim for non-existent losses.
BP has taken its grievances over the handling of the affair to the US appeals court, insisting it has become the victim of “fictitious and inflated” compensation claims which threaten its future.
The oil major, still awaiting a decision, says handling of the settlement has sparked a “feeding frenzy” and is allowing businesses from the Gulf coast to claim for “non-existent, artificially calculated losses”.
Its total estimated bill following the disaster, including clean-up costs and fines, now stands at $42.4bn.
Costs are being paid out of a $20bn US trust fund set up after the disaster, but latest figures show $19.7bn of this has been used up meaning BP is likely to face questions over where it will find more cash should the compensation bill climb.
The company disclosed the new figure as it published results for the second quarter of the year, which showed profits down sharply to $2.7bn. The 25% decline compared with the same period last year was blamed on lower oil prices and a higher tax bill.
Stock in BP sank on the news, slipping more than 4% in early trading and closing down 3.4% or 16p at 451.5p.
Chief executive Bob Dudley said there had a been a strong underlying pre-tax performance from his businesses, with growth in production from new projects and good progress in exploration.
But BP admitted the rate of new compensation claims meant it would soon have to start paying them out of its profits as money from the trust fund runs out.
“We expect that, in the third quarter, the remaining amount for items covered by the trust will be fully utilised and additional amounts will be charged to the income statement,” the company said.
The $9.6bn now set aside does not include any provision for economic loss claims not yet received or processed by the settlement programme’s administrators, meaning the total could yet be “significantly higher” even if BP wins its legal challenge.
The blow-out of the Deepwater Horizon well off the Louisiana coast in 2010 claimed 11 lives and damaged fishing and tourism industries as well as marine and wildlife habitats, forcing BP to agree a multi-billion-dollar compensation deal in April last year.
However, it has warned in court filings that it will be “irreparably harmed” unless the compensation system is reformed, saying the cash drain could put its dividend at risk and make it vulnerable to a takeover.