BP plans return to Gulf of Mexico as spill costs continue to hit profits

BP hopes to resume drilling in the Gulf of Mexico later this year it emerged yesterday, as the company revealed that last year's devastating spill continues to drag on profits.

The London-listed oil giant hasapplied for permits to return to drilling in the Gulf, its chief financial officer, Byron Grote, said.

BP announced yesterday that its"replacement cost" profit had fallen from almost $5.6bn between January and March 2010, to $5.4bn (£3.3bn) a year later. The first-quarter results were hit by a $400m charge related to the Deepwater Horizon oil spill as well as lower production, higher exploration write offs and a lower contribution from gas marketing and trading. This came despite a 38 per cent jump in the price of oil and soaring refining margins.

While the latest charge brought the total estimated bill to $41bn, this quarter's charge was the smallest since the company managed to stop the spill.

Nick Raynor, investment advisor at The Share Centre, said: "Profits have fallen further for BP during Q1 as the cost of the clean-up in the Gulf of Mexico continues to mount. This fall was expected and is likely to continue into Q2. BP is currently selling off large amounts of its assets and until this strategy is completed it is difficult to predict future profit level."

The company said it had completed most of the shoreline clean-up and undersea work around the Gulf during the three months. It started surveying the seabed towards the end of last month – expected to take up to 60 days – and said that there was some limited work to complete the cleaning of the marshes and barrier islands.

In February, BP paid $1.2bn to the Deepwater Horizon Oil Spill Trust fund set up last year. Nick Copeman, analyst at Oriel, said the Macondo incident "will hamper the near-term growth of the business and prevent dividend growth until the gross misconductliability is resolved" next year. Production was 11 per cent lower in the first quarter over the previous year. It was hit after the group sold off some of its oil fields to help to pay costs related to the spill, as well as higher turnaround and maintenance activity in the North Sea, Angola and the Trans-Alaska Pipeline system.

BP also revealed that the falls were partly offset by its first production from Iraq. The net income at Russian joint venture TNK-BP also rose, more than doubling to $1.1bn.

The legal battle surrounding the Russian venture has yet to be resolved while yesterday it emerged that cruise company Carnival filed a lawsuit last week in the District Court of New Orleans, which also named firms including Transocean and Halliburton, after saying it had lost revenues because of last year's spill. Carnival wants compensation and damages but has yet to specify a sum.