The Deepwater Horizon disaster.
But the oil major's embattled boss stood by claims that the group had "turned the corner" after the world's worst offshore spill.
Atoning for the blow-out in the Gulf of Mexico has been expensive for BP and second-quarter figures showed a 35% fall in underlying profits to $3.7-billion. Despite chief executive Bob Dudley's assertion that BP had moved on from the hammering its reputation and finances had taken, one analyst warned that BP was "testing the faith" of investors.
The blow-out at a BP-operated well in April 2010 caused an explosion on the Deepwater Horizon rig that killed 11 people and saw 4.9-million barrels of oil gush into the sea off the coast of Louisiana, leaving the group with a multibillion-dollar damages and clean-up bill.
It announced in its latest quarterly update that the cost had risen owing to "an increase in the provision for various costs and litigation relating to the incident". The $38-billion includes $14-billion in costs to restore 7000km of shoreline and $8.8-billion in compensation payments, although it has been reduced by $4-billion following settlements with partners in the ill-fated Macondo well.
Turned the corner
Dudley said he stood by his comments in October last year that the group had "turned the corner", operations were returning to normal and setting a target of a 50% increase in cash flow by 2014. "I don't think that the company is losing its way whatsoever," he said, pointing out a return to production in the Gulf where six rigs are now operating.
"These things are massively important in terms of getting BP back to work. BP is a company still making a transformation. We are building a stronger, safer company."
The fall in underlying profits to $3.7-billion in the three months to June 30 reflected lower oil and gas prices, a higher-than-expected tax hit on its troubled Russian joint venture and maintenance overhauls on its remaining Gulf of Mexico operations. The results included $4.8-billion of write-downs largely related to its United States refinery and shale gas businesses, after the performance of the latter was hit by a gas price that nearly halved since last year. BP shares fell by 4.3% to 425.05p.
Richard Hunter, head of equities at stockbroker Hargreaves Lansdown, said the results were worse than recent figures from fellow majors also affected by lower commodity prices. "BP has unfortunately surpassed the disappointing scene which had already been set by Shell and Exxon."
Richard Griffiths, analyst at Oriel Securities, said the figures were "testing the faith" of investors and on a divisional basis "missed [expectations] at every level".
Dudley said two clouds continued to hover over the company. There was "significant uncertainty" over its Deepwater Horizon obligations because it had yet to reach a settlement with the US department of justice. The group was also embroiled in a dispute with its partners in Russian venture TNK-BP, which accounts for 10% of BP's profits in a normal year.
"Until we are able to resolve one or both those issues, we will continue to have a higher level of uncertainty over the company," Dudley said. – © Guardian News & Media 2012