BP Says Gulf Coast Oil Spill Has Cost $350 Million Thus Far

May 10, 2010

Oil major BP Plc said the oil spill in the Gulf of Mexico had cost it $350 million so far, suggesting the final bill could be much higher than many analysts predicted, and hitting the company’s shares.

BP said in a statement on Monday the sum referred to the cost of spill response, containment efforts, relief well drilling, payments to the Gulf Coast States to speed up their response plans, some compensation claims and federal costs.

The London-based oil major — until the leak, Britain’s largest company by market value — declined to give a further breakdown, such as what types of compensation payments had been made, or were still pending.

BP shares fell 1.1 percent at 0829 GMT, lagging a 2.5 percent rise in the STOXX Europe 600 Oil and Gas index.

The stock has lost 16 percent since the Deepwater Horizon rig caught fire with the loss of 11 lives, wiping around $30 billion off BP’s market value.

Analysts have offered forecasts for spill clean-up costs and compensation that range from a few hundred million dollars to $12.5 billion.

BP’s latest figures show the lower estimates to be wildly optimistic but so far there is no indication the higher estimates will be exceeded.

Until the end of last week, BP said the clean up effort was costing $6 million/day.

Over the weekend, BP suspended operations on a plan to cap the leak with a metal dome, due to problems with gas coming from the well.

The company said it was investigating other possible options to cap the leak, while continuing to drill another well that it said was certain to stem the flow but which could take three months to complete.

“BP appears to be turning to more adventurous, and potentially more expensive, solutions,” analysts at BOA Merrill Lynch said in a research note.

The final bill is likely to be much higher than the $350 million figure announced on Monday as the well which caused the leak is still pumping at least 5,000 barrels per day of crude into the sea and the spill has yet to hit land.

Only traces of oil have been reported on Gulf beaches so far and clean up costs will accelerate when major landfall occurs.

Fishing has been impacted, prompting fishermen’s groups to lodge lawsuits for damages while others, including people in the tourism industry, have complained of losses due to the spill.

Fishing and tourism damages could run into several billions of dollars, analysts said.

The spill is expected to head westward next, suggesting the important shipping channels off the central Louisiana coast, west of the Mississippi Delta could be impacted.

BP has said it would cover all “legitimate” claims for compensation.

BP owns 65 percent of the well. Anadarko Petroleum owns 25 percent and Japan’s Mitsui owns 10 percent. All are liable for costs on a proportionate basis.

(Reporting by Tom Bergin; Editing by Mike Nesbit and Louise Heavens)

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