BP Still Paying Gulf Oil Spill Claims as Court Battles Wind Down
BP Plc raised the amount it will pay this year for the Deepwater Horizon accident as thousands of lawsuits related to the biggest oil spill in U.S. history start to wind down.
The 2010 explosion at a well in the Gulf of Mexico threatened BP’s existence after 11 people were killed and millions of barrels of oil spilled into the sea. While the latest liabilities will add to the more than $60 billion of penalties the company has already racked up, Chief Executive Officer Bob Dudley will see an end in sight to the largest court battles.
The London-based company will record a new $1.7 billion charge in the fourth quarter of 2017 and pay $1 billion of that bill in 2018, it said in a statement Tuesday. The remainder will be distributed over a number of years.
“With the claims facility’s work very nearly done, we now have better visibility into the remaining liability,” Chief Financial Officer Brian Gilvary said in the statement. “The charge we are taking as a result is fully manageable within our existing financial framework, especially now that we have the company back into balance at $50 per barrel.”
The latest charge will cover payments to business owners in the area, BP said. The company’s spill-related payouts will rise to $3 billion in 2018 from an earlier estimate of $2 billion, while those for 2017 will remain at $5.5 billion.
The payments have held back BP’s profits in the past. Its shares dropped as much as 2.1 percent in London on Tuesday, the biggest loss in the Stoxx Europe 600 Oil & Gas index.
The British company faced more than 390,000 claims from businesses such as seafood producers and tourism providers following the oil spill. BP says some of them aren’t genuine. More than 99 percent of the cases have been reviewed, according to court documents. Some are being paid out when determined to be valid.
Still, the “last few remaining claims are likely to be the most complex and sizable,” according to Brendan Warn, an analyst at BMO Capital Markets Ltd.
The company agreed to settle all claims with the U.S. federal and state governments in a $21 billion agreement in 2015, removing a major chunk of risks related to the deadly accident and allowing Dudley to grow the company again. BP had at that time agreed to make the payments over about two decades, softening the blow on its balance sheet.
The company has said it will pay for the spill with money raised from asset sales. The higher 2018 payout means it will need to raise its divestment program for the year, according to Oswald Clint, an analyst at Sanford C. Bernstein Ltd.
That’s “fully manageable” within the company’s existing finances, he said. “While truing up the oil-spill charge is a short-term headwind, we don’t see it preventing a solid delivery year for BP.”