More than six years on from the Deepwater Horizon oil spill, BP has finally released a ‘reliable estimate’ of the final bill. Having recently taken steps to resolve all of the outstanding claims relating to the disaster, the total cumulative pre-tax charge has been estimated at $16.6bn, or $44bn after tax.
By putting a figure on the fallout, BP has finally drawn a line in the sand and given investors some much-needed reassurances about its financial standing.
BP’s Chief Financial Officer Brian Gilvary said in a statement: “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.” The company expects to take a pre-tax non-operated charge of around $2.5bn in the second quarter, as a result of its endeavours to settle all remaining liabilities, together with an additional $5.2bn pre-tax charge. Gilvary continued: “Importantly, we have a clear plan for managing these costs and it provides our investors with certainty going forward.”
BP forked out a mammoth $14bn in the immediate aftermath of the Deepwater Horizon oil spill to patch up the leak and carry out the clean up operation
The oil giant forked out a mammoth $14bn in the immediate aftermath of the incident to patch up the leak and carry out the clean up operation. Federal, state and local governments last year agreed to a $20bn charge for civil penalties and environmental damages, plus an additional $4.5bn to resolve criminal charges. The settlement was the largest to be reached with any single company in US history, and BP was forced to sell off more than $45bn in assets to help cover the costs.
In all, approximately 384,000 claims were filed for compensation under the settlement for businesses and individuals, the majority of which have been resolved.
The company expects that any outstanding claims not covered by this latest charge will not have a material impact on its financial performance. As damaging an episode as the Deepwater Horizon spill was, BP’s success in weathering the storm gives investors reason to believe the company is on a solid financial footing.