BP’s Miraculous Escape From Deepwater Horizon

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Lost to some who saw the announcement that BP (NYSE: BP) had settled claims with Anadarko (NYSE: APC) over the Deepwater Horizon explosion and subsequent leak was the fact that the UK-based oil giant will no longer have to pay money into the Independent Claims Facility. BP received $4 billion from Anadarko that it will place into the fund. It is another sign that BP’s liabilities will be much less than anticipated. The company has come away from the incident nearly unscathed compared to what was expected in the summer of last year.

BP established the fund to cover costs of the disaster. Many of the expected claims came from individuals who live in the Gulf of Mexico region and thousands of businesses as well. The BP board established the facility because of pressure from the Obama administration. The pool was to be funded by a total payment of $20 billion over three and a half years. Now, just 14 months after its establishment, BP’s obligation are fulfilled.

Famous attorney Ken Feinberg, who runs the Independent Claims Facility (now called the Gulf Coast Claims Facility), said in August that $5 billion had been paid out in the first year of the fund’s existence. Feinberg said 97% of the 949,892 claims made to the fund had been processed. That means the likelihood that the entire $20 billion will be used is very low.

BP’s financial prospects were questioned as the fund was established. Liability concerns of all kinds about the explosion and leak prompted BP to sell off billions of dollars in assets. There were even rumors that BP would have to file for bankruptcy to offset the costs of Deepwater Horizon. The assessment of the damage to BP was premature and overblown.

BP could get the majority of its $20 billion back, particularly now that Anadarko has made an indirect contribution to the fund. The large oil company will have made an escape from Deepwater that no one expected.

Douglas A. McIntyre