The cost to BP plc (ADR) (NYSE:BP) for the Deepwater Horizon disaster continues to rise, with the company’s latest announcement that it would take a $1.7 billion charge in its fourth-quarter earnings because of settlement claims related to the 2010 Gulf of Mexico incident. BP stock was trading down about 1.5% this morning in London.
The incident killed 11 people and triggered the worst offshore oil spill in U.S. history. With this latest charge, BP’s bill for the disaster now approaches $65 billion, some two years after the company’s $20 billion settlement with the U.S. government. In it’s announcement, the oil company said U.S. court-supervised settlement program is soon to be completed.
BP is expected to report fourth-quarter results on Feb. 6. The analyst consensus is for 57 cents a share on revenue of $50.7 billion. According to media reports, Q4 results were already being scrutinized because after BP previously announced a separate $1.5 billion accounting charge related to the U.S. tax overhaul.
The charge comes just as BP and its peer are seeing some recovery in oil prices. Crude prices have increased to about $70 a barrel from a year low of $46.38. The BP stock price has gained more than 25% in the last six months, in part on the strength of oil prices.
According to the Wall Street Journal, BMO Capital Markets estimated that the unexpected higher payments would increase the price of oil BP needs to cover its spending and dividends with cash by $5 a barrel this year. BMO expects the company to be able to manage that and continue its share-buyback program.
Late last month, InvestorPlace contributor Will Ashworth wrote that “as we head into 2018, BP stock, in my opinion, is the most interesting to own of the big players.” “As the company moves forward with asset sales in the fourth quarter, its net debt will continue to shrink. Furthermore, it announced share repurchases of approximately $400 million quarterly at the end of October to reduce the share count that’s drifted higher in the past two years after issuing shares to keep paying the dividend.”
