BP Deepwater Horizon Costs Balloon to $65 Billion
Response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon April 21, 2010 (File photo: U.S. Coast Guard)
BP said on Tuesday it would take a new charge over the 2010 Deepwater Horizon spill after again raising estimates for outstanding claims, lifting total costs to around $65 billion.
The post-tax, non-operating $1.7-billion charge BP will take in its fourth quarter results came after claims resolved in recent months were about seven times higher than anticipated, the London-based company said.
The claims were part of the Court Supervised Settlement Program that was set up in the wake of the disaster and included nearly 400,000 cases, BP said. A spokeswoman for the group said hundreds of outstanding claims have yet to be closed, raising the prospect of further charges.
BP shares were down 2 percent by 1117 GMT.
BP paid around $63.4 billion by the end of September to cover clean-up costs and legal fees linked to the largest environmental disaster in U.S. history where 11 rig workers were killed.
Charges over the spill have steadily grown since the company reached a landmark $19-billion settlement of federal and state claims in July 2015.
Remaining Claims
In July 2016 it announced a $2.5-billion charge after resolving a number of claims, saying it could "now reliably estimate all of its remaining material liabilities".
BP's chief financial officer said on Tuesday that "with the claims facility's work very nearly done, we now have better visibility into the remaining liability".
As a result of the latest charge, BP's cash payments for the spill are now expected to reach $3 billion compared with a previous estimate of $2 billion.
Although the settlements of claims in recent months were significantly higher, BP and analysts expect the latest charge to be fully manageable as BP is set to see a sharp increase in revenue this year thanks to higher oil prices.
Still, there was a risk that the final bill could rise again, Brendan Warn, analyst at BMO Capital Markets said.
"We note that the last few remaining claims are likely to be the most complex and sizeable, with this quarter's provision being evidence of that," Warn said.
"We acknowledge the possibility that there might be further provisions in the next few quarters, as the remaining claims might prove to exceed BP's expectations."
(Additional reporting by Kate Holton; Editing by Jason Neely and Andrew Heavens)
(Additional reporting by Kate Holton; Editing by Jason Neely and Andrew Heavens)
