BP’s (LON:BP) reported a dramatic drop in profits this morning, attributing poor results to lower crude prices and a huge fine related to the 2010 Gulf of Mexico oil spill.

Underlying replacement cost profit was $1.31bn (£841m) compared with $3.63bn a year ago. The British oil and gas company also cut its planned full-year capital spending again to “below $20 billion”, after cutting it 13 percent to $20 billion earlier this year.

At the beginning of this month BP reached a settlement of $10.8 billion with the US Department of Justice over the Deepwater Horizon oil spill, which was one of the worst environmental disasters in history. After setting aside $7.5bn for further costs relating to the case, BP recorded a loss of $6.26bn.

BP were further impacted by the price of oil, which is more than 50% lower than last year. Brent crude oil stood at $52.93 a barrel on Tuesday, compared with roughly $115 a year ago.

BP chief executive Bob Dudley said: “The external environment remains challenging, but BP moved quickly in response and we continue to do so.

Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the group and we continue with capital discipline and divestments.

In the past few weeks, oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future.”