PLC said its costs from the deadly 2010 Gulf of Mexico oil spill would rise by an additional $5.2 billion and ultimately cost $61.6 billion to put one of the worst environmental disasters in U.S. history behind it.
The British oil giant said on Thursday the pretax charge for its second quarter likely would be the last from the Deepwater Horizon accident to have a “material impact” on its financial performance, signaling an end to six years of mounting costs that humbled one of the world’s largest energy companies.
Until now, BP had said it was impossible to estimate the ultimate corporate cost of the Macondo well blowout, which killed 11 workers and released 3.2 million barrels of oil into the Gulf of Mexico over almost three months. The spill upended the Gulf fishing industry, decimated the region’s wildlife and prompted a massive cleanup effort.
BP’s costs are much larger than the fines levied on individual banks involved in the subprime mortgage crisis last decade or the 1989 Exxon
-Valdez spill, which cost the U.S. company $4.3 billion.
“I know of no other more expensive man-made corporate disaster,” said Daniel Jacobs, a former Justice Department environmental lawyer who is writing a book on the disaster. “The number is huge.”
Further Deepwater Horizon costs will be treated as an ordinary part of BP’s business rather than a lingering uncertainty, the London-based firm said.
‘Today we can estimate all the material liabilities remaining…’
Thursday’s disclosure came about a month after it resolved one of the last pieces of litigation arising from spill, agreeing to pay investors $175 million to settle allegations it failed to fully disclose the business risks. That came on top of a roughly $20 billion agreement with state and federal governments—among the largest corporate penalties in U.S. history—to resolve all state and federal claims relating to the spill.
Brian Gilvary, BP’s finance chief, said the company had made “significant progress” over the past few months in resolving the thicket of litigation related to the spill.
“Today we can estimate all the material liabilities remaining from the incident,” Mr. Gilvary said. “Importantly, we have a clear plan for managing these costs and it provides our investors with certainty going forward.”
BP has struggled to pivot from a disaster that has drained the company of resources for six years and forced it to retrench into a period of cost savings and downsizing long before oil prices began a steep descent in 2014. It has sold more than $40 billion in assets since the spill.
The charge will affect BP’s profits for June 30 quarter, which will be released on July 26. After tax, the charge will amount to about $2.5 billion, and the company estimates the total post-tax bill to be $44 billion.
The relentless fallout from the massive oil spill has dragged on the company’s efforts to forge a new strategy. BP executives have long been able to blame the Macondo disaster for poor financial performance but will now be expected soon to put forward a plan to recharge its ambitions.
Payment of the federal settlement is scheduled to begin later this year, with an average distribution of around $1.1 billion annually over a period of 18 years. The company has said asset sales will cover the cost of settlement payments.
contributed to this article.
Write to Tapan Panchal at Tapan.Panchal@wsj.com
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