BP estimates Deepwater Horizon liabilities at US$44 bn after tax

BP recently announced that it can now reliably estimate all of its remaining liabilities in connection with the 2010 Deepwater Horizon oil spill, saying that the total cumulative pre-tax charge relating to the incident is atUS$61.6 billion or US$44 billion after tax. This comes following the company’s significant progress in resolving outstanding claims arising from the oil spill.

BP expects to take an after-tax non-operating charge of around US$2.5 billion in its second quarter 2016 results.This charge is expected to include a pre-tax non-operating charge associated with the oil spill of around US$5.2 billion.

The company also believes that any further outstanding Deepwater Horizon-related claims not covered by this additional charge will not have a material impact on its financial performance. It will deal with remaining claims in the ordinary course of business.

Brian Gilvary, BP chief financial officer said: “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.”

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.

A year ago, BP reached agreements to settle outstanding federal, state and local government claims arising from Deepwater Horizon. In the months since, BP has made much further progress in resolving outstanding claims arising from the incident including the 2012 Plaintiffs’ Steering Committee (PSC) settlement, a $175 million settlement from the MDL 2185 securities litigation as well as other opt-out and excluded claims.