BP is saddling up to incur an additional US$2.5 billion charge to resolve the company’s outstanding claims from the disastrous 2010 Deepwater Horizon spill, which brings its total to nearly $62 billion.
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Image from BP Instagram. |
The UK supermajor announced today (14 July) that it can now reliably estimate all of its remaining material liabilities in connection with the incident, and that the company expects to take an after-tax non-operating charge of around $2.5 billion in its Q2 2016 results.
“This charge is expected to include a pre-tax non-operating charge associated with the oil spill of around $5.2 billion,” BP said in a statement. “This would bring the total cumulative pre-tax charge relating to the Deepwater Horizon incident to $61.6 billion or $44 billion after tax.”
“Over the past few months we’ve made significant progress resolving outstanding Deepwater Horizon claims and today we can estimate all the material liabilities remaining from the incident. Importantly, we have a clear plan for managing these costs and it provides our investors with certainty going forward,” Brian Gilvary, BP chief financial officer said.
On 10 April 2010, less than 50mi off the coast of Louisiana, the Macondo well suffered a tragic blowout, causing an explosion and fire that destroyed the Transocean Deepwater Horizon drilling rig, and resulted in the death of 11 men. The devastating incident caused an oil spill of more than 3 MMbbl into the Gulf of Mexico over a period of nearly three months.
According to the US Department of Justice (DOJ), oil flowed within deep ocean water currents hundreds of miles away from the blown-out well, resulting in oil slicks that extended across more than 43,000sq mi, affecting water quality and exposing aquatic plants and wildlife to harmful chemicals. Oil was deposited onto at least 400sq mi of the sea floor and washed up onto more than 1300mi of shoreline from Texas to Florida.
Gilvary reconfirmed that BP expects to continue to use proceeds of divestments to meet Deepwater Horizon commitments in line with the financial framework laid out in previous quarters.
The charge stemming from today’s announcement includes the estimated cost of settling all outstanding business and economic loss claims under the 2012 Plaintiffs’ Steering Committee (PSC) settlement, which are all expected to be paid by 2019.
BP said that there has also been significant progress in resolving economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement.
In February 2016, the US federal district court estimated that there were more than 85,000 valid opt-out and excluded economic loss plaintiffs. The vast majority of these claims have since been settled or dismissed as an order of the court today confirms. An estimate of the cost of the remaining claims, expected to be paid by the end of 2016, is also included in this charge, BP said.
In June, BP announced a $175 million settlement of claims from a class of post-explosion ADS purchasers in the MDL 2185 securities litigation, payable during 2016 - 2017. This cost is also included in today’s announced charge, the company confirmed.
In October 2015, the US and five Gulf states reached a $20.8 billion civil claims settlement with BP from Deepwater Horizon, which marked the largest settlement with a single entity in the DOJ history.
In July 2015, BP reached an $18.7 billion settlement agreement to be paid over an 18-year period to federal, state, five Gulf Coast states including Alabama, Florida, Louisiana, Mississippi, and Texas, and more than 400 local government entities.
Read more:
Transocean to pay US$20 million to Alabama for Macondo
US reaches US$20.8 billion Deepwater Horizon settlement
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