BP Clean-Up Costs Reach $4 Billion

BP plc’s (NYSE: BP) direct costs to clean up the damage from its leaking well in the Gulf of Mexico rose to $4 billion over the weekend. That is a relatively small amount compared to the $20 billion it has begun to put into escrow to cover future liabilities and damages to businesses and the environment due to the disaster, but it is nonetheless a sign that BP will need to cover costs beyond the escrow while it is still being  set up for operation. The current cost estimates have begun to take into account the successful capping of the well which seepage from the ocean’s floor may undermine.BP is still in the process of raising money to bolster it balance sheet. There are rumors that talks with Apache (NYSE: APA) to sell some of its Prudhoe Bay assets have broken down. BP hoped to get $10 billion from the transaction. BP can still draw down on its credit lines or raise money through debt or equity stakes, a move that its shareholders have resisted.

BP’s direct costs for the spill will come to an end as the $20 billion fund begins to make payments. BP’s liabilities may go beyond that of course. The company may have pulled itself back to its feet. Its share price rises most days now. But, if the spill has shown anything, it is that BP’s negligence often is followed by bad luck .

Douglas A. McIntyre