BP to post $1.7B charge on Deepwater Horizon

LONDON (UPI) — British energy company BP said it expects a charge of around $1.7 billion in its fourth quarter earnings as a result of the Deepwater Horizon settlement. BP said Tuesday that its court-supervised settlement program related to the class action settlement on the 2010 spill is winding down and it expects those charges to show up in fourth quarter results. The total cash impact, however, will be spread out over a multi-year period. “With the claims facility’s work very nearly done, we now have better visibility into the remaining liability,” Brian Gilvary, BP’s chief financial officer, 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.” BP released 3.2 million barrels of oil into the Gulf of Mexico in 2010. The accident left 11 workers on the Deepwater Horizon, a Transocean rig leased by the British supermajor, dead. The company said Tuesday it expects cash payments related to the Deepwater Horizon to be around $3 billion this year, compared with just over $2 billion for the third quarter. “BP will continue to vigorously appeal determinations of claims that it believes are non-compensable under the Plaintiffs’ Steering Committee settlement agreement,” it added. The British energy company said its after-tax earnings would be supported by a provision in the U.S. corporate tax overhaul, which dropped from 35 percent to 21 percent as of Jan. 1. At the start of the year, BP said the provisions in the new U.S. tax code that extend permanent relief to corporations meant it has to revalue some of its liabilities. For its statement for the fourth quarter, due Feb. 6, the company said it expects a $1.5 billion one-off non-cash charge from the U.S. corporate income tax reduction. The tax overhaul, passed along party lines with no Democrats in support, contains several provisions that favor oil and gas companies. For the third quarter, BP reported its underlying replacement cost profit, a metric used to reflect net profit, of $1.87 billion. Spending during the third quarter was up 14 percent from the same period to $4 billion.