The announcement of second quarter results from beleaguered oil giant BP is likely to be overshadowed by the future of blunder-boss Tony Hayward and the ever mounting cost of the provisions for the Gulf of Mexico oil spill.Despite protestations of support for Hayward from the board earlier this month reports suggest that Hayward, who has been in charge of the company since 2007, has been negotiating the terms of his exit.If he goes, he will be paying the price for a number of public relations blunders in the aftermath of the oil spill in the Gulf of Mexico on 20 April, though some pundits have suggested that he has been made a scapegoat that will be sacrificed in order to BP to make a fresh start to restore its reputation.The shares have lost more than a third of their value over the last three months and the company has been under constant attack from the US media and government, and it may prove politically expedient for the company to replace Hayward - if he does go - with US citizen Bob Dudley, though Scotsman Iain Conn, head of Refining & Marketing, is also said to be in the frame as a potential replacement. As for the results themselves, expectations are for the company to announce quarterly profits have risen to £3.2bn ($5bn), but on the down side the liabilities from the oil spill are likely to break through the £13bn barrier.UBS expects the company to divide the costs of the oil spill response into three categories: the cash costs to date; the accruals for future costs; and the un-accrued future contingencies.It expects BP to take a special charge of $10bn (£6.5bn) for the quarter which would wipe out underlying earnings. Others have suggested the charge could be as low as £1bn. "In addition, balance sheet gearing and access to funding will be an area of focus in terms of disclosure, although market concerns should be eased with the recent announcement of the disposal of upstream assets to apace," UBS said.BP has already committed to putting $20bn into escrow in order to meet claims for damages from local businesses. Some have suggested that the final bill could rise as high as $60bn, which would almost certainly result in BP delaying a return to dividend payments for several years, much to the consternation of the UK pension fund community.As Charles Stanley's Tony Shepard puts it: "Provisions for the oil spill costs and the tragic event will be separated out as an identified item through the profit & loss account, balance sheet and cash flow statements and it will be a permanent feature in the results for some time."Panmure Gordon forecasts underlying replacement cost net income of $4.83bn but notes it is at the bottom of the range which spans as high as $5.29bn. "We believe there could be significant charges taken over the quarter for the costs associated with the Macondo well, with BP probably opting to take a significant hit to the bottom line rather than successive quarters of charges. This could lead to it reporting a substantial headline loss," the broker said."At the operating level we forecast E&P [exploration & production] operating profits of US$7,068m (US$8,292m in Q1 2010). Although the company will benefit from higher oil and gas prices, it will see a seasonal dip in production due to lower gas sales. It will also suffer from increased maintenance and the impact of the Macondo well. Trading profits could also be hurt from the flat prices over the quarter. The downstream division is expected to generate operating profits of US$1,112m (US$729m in Q1 2010) as it is able to benefit from a recovery in refining margins," Panmure Gordon said."Away from the Gulf of Mexico, the tragedy has had little impact on the existing business, so far," Charles Stanley notes."In upstream (E&P), Q2 oil prices at $78/bbl have been firmer than Q1's $76/bbl though Q2 prices are some 30% higher than a year ago. US benchmark gas prices were lower in Q2 at $4.7/mmbtu [millions of British thermal units] compared to Q1's $5.3/mmbtu though some 15% higher than a year ago. Production is expected to show a decline possibly as high as 3% due largely to scheduled maintenance in the North Sea, Angola as well as the Gulf of Mexico," Charles Stanley investment analyst Tony Shepard said. "In Q2, we expect a $7bn profit contribution from E&P. In the Gulf of Mexico, deepwater production accounts for about 15% of BP's total net liquids production and output could be some 50,000b/d [barrels per day] lower in 2011. Trading conditions in downstream (Refining & Marketing) may have improved slightly over Q2. In the second quarter, the BP Refining Global Indicator Margin was about $5.5/bbl compared to $3.1/bbl in Q1 and $5/bbl a year ago. We expect a $1bn profit contribution compared to $1.5bn a year ago. In this business, BP outlined that it was committed to improve the underlying profitability by about $2bn over the next 2/3 years.," Shepard added.