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Rig blast shadows rise in BP profits

The Sunday Telegraph: BP is expected to say this week that profits almost doubled in the first quarter, as it investigates the circumstances surrounding the explosion of a drilling rig it had hired in the Gulf of Mexico.

By Angela Monaghan and Lawrie Holmes
25 Apr 2010

The energy company is expected to announce profits of around $4.8bn (£3.1bn) on Tuesday, almost twice its earnings in the first quarter of 2009. BP and other energy companies are benefiting from higher oil prices, and BP has outlined plans to start 42 major new projects by 2015, and cut further costs to boost future profits.

However, the first quarter results come at a difficult time, following the explosion last week of the Deepwater Horizon oil rig, owned by Transocean, which was located 130 miles south-east of New Orleans.

Tony Hayward, BP chief executive, yesterday offered his condolences to the families of 11 workers presumed dead after the US Coast Guard suspended its search on Friday.

“We owe a lot to everyone who works on offshore facilities around the world and no words can express the sorrow and pain when such a tragic incident happens.

“On behalf of all of us at BP, my deepest sympathies go out to the families and friends who have suffered such a terrible loss. Our thoughts also go out to their colleagues, especially those who are recovering from their injuries,” he said.

Mr Hayward said: “BP will be working closely with Transocean and the authorities to find out exactly what happened so lessons can be learnt to prevent something like this from happening anywhere again.”

The explosion is the latest in a series of major issues affecting BP. Last month investors tabled a motion at the annual meeting calling on the company to review its environmental and financial risks around extracting oil from tar sands.

An engagement campaign filed a shareholder resolution calling on the company to produce a report about the development programme in Canada.

Although the resolution was defeated, it focused investor opinion on the issue of oil sands and led the company to disclose greater detail on its plans than was previously in the public domain. The resolution was defeated but achieved a vote of 5.9pc in favour, including support from US funds CalPERS and CalSTRS, with a further 9.3pc abstaining.

Since then BP chief executive Tony Hayward has said BP will press ahead with its tar sands project. At the same meeting Mr Hayward’s pay package last year of £4.45m was challenged by consultancy PIRC which said his combined annual bonus and performance share award amounted to 777pc of base salary, an increase of 56pc on 2008. There was a vote against the remuneration report of about 8.5pc, as recommended by PIRC and further abstentions of 7.5pc. BP said Mr Hayward’s pay package last year was justified because the company outstripped competitors in four areas, including output growth and return on capital employed.

This week Shell is expected to almost double its current cost of supply net income, which strips out unrealised profits or losses related to changes in the value of inventories, from £2.2bn to around £4bn this year. Last month Shell said it would keep its dividend unchanged for this year and possibly longer, in spite of a forecast of strong growth, at its annual strategy briefing. At the same time Shell said it expected production to grow by 11pc during 2009-12 as new projects in Qatar and Canada come on stream. Next month Shell will come under scrutiny over its tar sands project in Canada. Over 140 investors including Co-operative Asset Management and the UNISON Staff Pension Scheme have co-filed a shareholder resolution for the company’s agm in May.

Parliament offers Shell’s oil men a lesson on the expense of overpaying


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