What’s bigger than the value of Ford, Honda or General Motors? As big as the biggest U.S. electric utility? Eight times the size of Staples and Office Depot combined — if a judge hadn’t blocked their merger?
The answer: the $61.6 billion cost to BP of the 2010 oil spill in the Gulf of Mexico.
On Thursday, BP issued its final estimate of the cost of the spill, the largest in U.S. history. The company said that it would take a pre-tax charge of $5.2 billion in the second quarter of this year and added that would be enough to cover anything that hasn’t been resolved.
On an after-tax basis, BP’s spill costs will amount to $44 billion with the additional charge of $2.5 billion in the second quarter, the company said.
“It’s a really scary number,” said Fadel Gheit, oil analyst at Oppenheimer & Co. “Before the accident, BP had a market capitalization of $180 billion. The accident actually shaved off one-third of the market capitalization of the company. It’s a miracle that the company is still in business.”
BP paid all sorts of people, including shrimp fishermen on the Louisiana coast, motels in Mississippi, school districts in Florida and the Environmental Protection Agency, which received $4 billion in criminal fines and more than $14 billion in Clean Water Act penalties and compensation for natural resource damages. The cost includes medical costs, property damage, economic losses, its own cleanup costs and a settlement with the Securities and Exchange Commission.
“We’re lucky that BP was not a small company, because at the end of the day, the government would have shouldered the entire weight of the accident,” Gheit said.
BP said it believes that any further outstanding spill-related claims “will not have a material impact” on BP’s finances.
Brian Gilvary, BP’s chief financial officer, said BP now has “a clear plan for managing these costs, and it provides our investors with certainty going forward.”
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