BP reports $4.9bn annual loss after oil spill costs

BP has reported a loss of $4.9bn (£3.1bn) for 2010, its first annual loss since 1992.

The company said the replacement cost loss reflected a sum of $40.9bn set aside for charges relating to the giant oil spill in the Gulf of Mexico.

The loss compares with a profit of $13.9bn that BP had recorded in 2009.

The company's chief executive, Robert Dudley, said BP would restore its dividend payment to shareholders, paying seven cents a share.

The dividend pay-outs had been suspended in the wake of the Gulf spill.

The company's chairman, Carl-Henric Svanberg, said: "We have chosen a prudent level that reflects the company's strong underlying financial and operating performance but also recognises the need to fully meet our obligations in the Gulf of Mexico and to maintain financial flexibility."

The BBC's business editor, Robert Peston, said the suspension of the dividend for nine months cost shareholders £4.9bn.

However, he said the level of the new dividend means that in total shareholders will be getting £3.2bn a year less than what they were receiving in 2009.

The company said there was "considerable uncertainty" over the final cost to the company of the Gulf spill and that it hoped its partners in the well - which include Transocean and Halliburton - would pay the majority of the compensation payments themselves.

BP's chief financial officer, Byron Grote, said: "Most of the cost we would view as charges to our partners. We're billing them for most of the costs that we're incurring."

He did add that: "They've not responded."

Oil prices

BP's profits during the fourth quarter of 2010 were $4.6bn, a third higher than in the same quarter a year previously.

Some of that increase was thanks to the rising oil price, which had climbed to $90 a barrel by the end of last year.

BP also said in its results statement that it would sell two US oil refineries, including the Texas City refinery, where 15 workers were killed and 170 injured in an explosion in 2005.

The company is restructuring its business and has already sold interests in Argentina, North America, Venezuela, Vietnam, Colombia and Egypt.

Joseph Lampel, professor of strategy at Cass Business School, said he expected the company's strategy for 2011 to continue the path set in 2010.

"BP will continue to emphasise safety and will be trying to generate more cash," he said.

"It has been fortunate that the oil price has been much higher, which has cushioned it to some extent from the effects of the problems last year."

Injunction

Last month BP announced a $10bn partnership with the Russian state-controlled oil firm Rosneft to explore for oil in the Russian Arctic.

That deal has upset existing Russian investors in TNK-BP - another Russian joint venture.

On Tuesday, AAR - the consortium which owns half of TNK-BP - won an injunction in the High Court to stop the new joint venture.

AAR had argued that its arrangement with BP means that any exploration should be done with it, rather than a rival company.

Before the High Court's decision, BP and AAR had already agreed to go to arbitration in Sweden in the week starting 14 February.

"It has always been BP's position that these matters should be resolved through arbitration, and we are pleased that this is what the Court has now decided," BP's head of Russia David Peattie said.

A spokesman for Rosneft said the court move should not derail the deal, while analysts said the granting of an injunction did not come as a surprise and they expected the dispute eventually to be resolved.