BP Expects Higher Charges Related To Deepwater Claims
Law360, New York (January 16, 2018, 1:53 PM EST) -- BP said Tuesday it anticipates a $1.7 billion charge in its 2017 fourth-quarter financial results, reflecting a greater value of settlement claims related to the 2010 Deepwater Horizon spill and the Fifth Circuit’s May rejection of most of the formula the company was using to calculate economic losses from the disaster.
The British oil giant said it now expects to pay about $3 billion in 2018, up from earlier estimates of $2 billion, for charges related to the blowout at the Macondo Prospect well that killed 11 people and caused 4 million barrels of oil to spill into the Gulf of Mexico.
“With the claims facility’s work very nearly done, we now have better visibility into the remaining liability,” BP’s chief financial officer Brian Gilvary said in a statement. “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.”
To calculate the settlement owed to a class of Gulf Coast businesses harmed by the disaster, BP had used a formula known as Policy 495, developed by the claims administrator and approved by a Louisiana district court. The formula consisted of five methodologies that divide claimants into two categories, with people engaged in construction, education, agriculture and professional services subject to four industry-specific methodologies and everyone else subject to an annual variable margin methodology.
But the Fifth Circuit in May found that the four industry-specific methodologies were not consistent with the text of the settlement terms, as they infringe on claimants’ right to choose their own compensation period. The court accepted the fifth method, the annual variable margin methodology, finding it to be consistent with the terms of the deal.
BP said Tuesday it will continue to “vigorously appeal” claims it believes don’t deserve compensation.
BP won the right to appeal individual Deepwater claim determinations in its $10.3 billion settlement in May 2015. A three-judge panel said, “where a settlement agreement does not resolve claims itself but instead establishes a mechanism pursuant to which the district court will resolve claims, parties must expressly waive what is otherwise a right to appeal from claim determination decisions by a district court.”
So far, BP has paid about $60.4 billion related to the oil spill, the company said in October. This includes the more than $20 billion settlement reached with the government in 2016 to settle federal and state claims, as well as agreements to end various private claims.
--Additional reporting by Kat Sieniuc. Editing by Kelly Duncan
The British oil giant said it now expects to pay about $3 billion in 2018, up from earlier estimates of $2 billion, for charges related to the blowout at the Macondo Prospect well that killed 11 people and caused 4 million barrels of oil to spill into the Gulf of Mexico.
“With the claims facility’s work very nearly done, we now have better visibility into the remaining liability,” BP’s chief financial officer Brian Gilvary said in a statement. “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.”
To calculate the settlement owed to a class of Gulf Coast businesses harmed by the disaster, BP had used a formula known as Policy 495, developed by the claims administrator and approved by a Louisiana district court. The formula consisted of five methodologies that divide claimants into two categories, with people engaged in construction, education, agriculture and professional services subject to four industry-specific methodologies and everyone else subject to an annual variable margin methodology.
But the Fifth Circuit in May found that the four industry-specific methodologies were not consistent with the text of the settlement terms, as they infringe on claimants’ right to choose their own compensation period. The court accepted the fifth method, the annual variable margin methodology, finding it to be consistent with the terms of the deal.
BP said Tuesday it will continue to “vigorously appeal” claims it believes don’t deserve compensation.
BP won the right to appeal individual Deepwater claim determinations in its $10.3 billion settlement in May 2015. A three-judge panel said, “where a settlement agreement does not resolve claims itself but instead establishes a mechanism pursuant to which the district court will resolve claims, parties must expressly waive what is otherwise a right to appeal from claim determination decisions by a district court.”
So far, BP has paid about $60.4 billion related to the oil spill, the company said in October. This includes the more than $20 billion settlement reached with the government in 2016 to settle federal and state claims, as well as agreements to end various private claims.
--Additional reporting by Kat Sieniuc. Editing by Kelly Duncan
No comments:
Post a Comment