US Government Adjusts Oil Spill Estimates

Leaked oil estimates from BP's Macondo well suggest slightly lower costs than we'd previously thought, but uncertainty remains

Catharina Milostan 3 August, 2010 | 2:47PM
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As BP is moving towards the last stages of killing the Macondo well, the US government fine-tuned its estimates of oil spill flow rates up to the July 15 halt under the sealing cap. This should help estimate the firm's oil spill exposure, though more regulatory or legal fines could be determined through the courts over the next few years.

Scientific teams estimate that 53,000 barrels of oil per day were leaking from the well just before well closure by the sealing cap, and total oil leaked from the well was about 4.9 million barrels. About 800,000 of the barrels were captured, leaving 4.1 million barrels of oil spilled into the Gulf. Applying the range of potential civil penalties at $1,100-$4,300 per barrel spilled, BP's exposure to civil penalties could be $4.5 billion-$17.6 billion. This comes in below the upper end of our earlier estimate for civil penalties of $3 billion-$22 billion. However, we caution that estimating oil spill costs remains highly uncertain, as BP still faces continuing oil spill and shoreline cleanup costs, multiyear funding requirements for the $20 billion claims fund, and potential future fines or penalties to be determined via the court system.

Catharina Milostan is an equity analyst with Morningstar.

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Security NamePriceChange (%)Morningstar
Rating
BP PLC382.00 GBX1.00Rating

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Catharina Milostan  Catharina Milostan is a stock analyst with Morningstar.

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