The agreement by BP PLC to pay $18.7 billion over 18 years in settlement of all federal and state claims that arose from the Deepwater Horizon disaster in 2010, needs to be approved by a federal judge in order to conclude a monumental legal battle.
This settlement means that the total cost to BP in legal and cleanup costs will be roughly $55 billion. The total bill for the oil spill will be higher than all the profits the company has earned since 2012.
The maximum fine of $13.7 billion the company faced under the Clean Water Act has also been reduced to $5.5 billion in terms of the settlement which was announced on Thursday. The government said this fine would be the largest under that law and the entire deal was the biggest it had ever reached with a corporation.
The environmental impact of the spill that leaked millions of barrels of crude into the Gulf of Mexico over an 87 day period looked to be set for years of litigation which have now been averted as a result of the settlement.
BP chairman Carl-Henric Svanberg said, “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payments for all parties involved.”
Investors showed their approval for the deal as shares in BP surged by 5.1% in U.S. trading on Thursday, adding more than $5 billion to its stock-market value. On the London market, the shares climbed by 4% to trade 20 pence higher at 439 pence in early afternoon trading.
Fitch ratings announced that the deal would strengthen the credit rating BP enjoyed. This in turn would help strengthen its balance sheet and its ability to cope with the yearlong downturn in oil prices.
The end of the saga was fittingly described by Tom Claps, a litigation analyst at Susquehanna Financial Group, who said, “Everyone is getting a significant amount of money, but BP gets to pretty much walk away and close this chapter.”
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