BP to take $1.7B charge as part of Deepwater Horizon settlement
UK oil major BP will take a $1.7 billion post-tax non-operating charge in the fourth quarter of 2017 as the Deepwater Horizon claims facility approaches closure.
BP informed on Tuesday that the Court Supervised Settlement Program (CSSP) established as part of the Deepwater Horizon (DWH) class action settlement, related to the 2010 Gulf of Mexico well blowout that killed eleven men, is winding down.
BP now expects to take a post-tax non-operating charge of around $1.7 billion in its fourth quarter 2017 results for the remaining Business Economic Loss (BEL) and other claims associated with the CSSP. The cash impact is expected to be spread over a multi-year period.
The charge results primarily from significantly higher claims determinations issued by the CSSP in the fourth quarter and the continuing effect of the Fifth Circuit’s adverse May 2017 ruling on the matching of revenues with expenses when evaluating BEL claims.
Brian Gilvary, BP’s chief financial officer, said: “With the claims facility’s work very nearly done, we now have better visibility into the remaining liability. The charge we are taking as a result is fully manageable within our existing financial framework, especially now that we have the company back into balance at $50 per barrel.”
Cash payments related to DWH in 2018 are now anticipated to be around $3 billion, as compared to the company’s third-quarter estimate of just over $2 billion.
BP concluded it will continue to vigorously appeal determinations of claims that it believes are non-compensable under the Plaintiffs’ Steering Committee settlement agreement.
As a reminder, the U.S. Government and five Gulf states, Alabama, Florida, Louisiana, Mississippi and Texas, hit by the massive oil spill from the Deepwater Horizon blowout, reached a settlement to resolve civil claims against BP in October 2015. The global settlement was worth more than $20 billion. This was the largest civil penalty in the history of environmental law.