BP says oil spill costs rise to $11.2 billion; Gulf of Mexico assets pledged as collateral

Friday, October 1, 2010

BP says oil spill costs rise to $11.2 billion

LONDON — BP PLC said Friday that it has pledged royalty revenues from several Gulf of Mexico assets to guarantee payment of claims from the disastrous blowout of its Macondo well.

The oil company said it has spent $11.2 billion so far reacting to the blowout, which began April 20 with an explosion that killed 11 workers aboard the Deepwater Horizon drilling rig. The well was declared to be fully sealed on Sept. 19.

BP announced in June that it would set up a $20 billion trust fund to guarantee payment of individual damage claims.

So far, BP said it has contributed $3 billion to the fund, and would add $2 billion in the fourth quarter. In following quarters, BP said the contribution would fall to $1.25 billion.

As collateral, BP said it had pledged the royalty interest in the Thunder Horse, Atlantis, Mad Dog, Great White and Mars, Ursa and Na Kika fields in the Gulf of Mexico.

“The pledging of these assets underscores our commitments to the trust which we set up to pay all legitimate claims arising from the tragedy,” said Lamar McKay, chairman and president of BP America Inc. and BP’s Gulf Coast Restoration Organization.

BP said it had paid $399 million to settle 127,000 claims up to Aug. 23, when the Gulf Coast Claims Facility took over the program. The GCCF has paid $806 million for 44,000 claims, BP said.

Friday’s announcement coincided with the first day on the job for new Chief Executive Bob Dudley, who replaces Tony Hayward.

On Wednesday, Dudley announced a major shake-up in the company, including creation of a Safety & Operation Risk unit which will have the authority to intervene in all of BP’s technical activities.

He also said the Upstream division, would be divided into three units responsible for exploration, development or production

BP shares were up 2.8 percent in morning trading on the London Stock Exchange to 439.75 pence, the highest level since May 28.

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