BP has announced that the company has reached a settlement with businesses and individuals impacted by the Gulf of Mexico oil spill. The blast on its drilling rig killed 11 men and released thousands of gallons of oil into the Gulf. BP expects to pay out $7.8 billion to settle a wide range of claims that includes property damage, lost wages, and loss to businesses.
The settlement also provides a system for monitoring health concerns and compensating people whose illnesses are found to have a link to the disaster. Many people have experienced rashes, shortness of breath, and other maladies that they believe were caused by the oil or the chemical dispersants used to break it up. Any claimants will have to be examined by a court-approved health care practitioner, and then a claims administrator working under a federal judge will determine who should receive compensation.
Some analysts said the expected payout was less than they had forecast. Analysts’ forecasts had covered a wide range for how much BP would be required to pay out to compensate fishermen, condominium owners, and hoteliers, with many predicting an amount around $14 billion. Shares in BP rose over 2% on the news. Jason Kenny, oil analyst at Santander, said, “On a trading basis we see a potentially quite positive reaction … BP moving to the 530-550 pence range near term (if not higher), and possibly higher thereafter.”
The agreement is expected to boost the chances of the company reaching a settlement with the U.S. government. Iain Armstrong, oil analyst with Brewin Dolphin, said, “What this agreement does, if it is implemented, is to give the management of BP further encouragement to try and reach a settlement out of court (with the U.S. Department of Justice).” Fadel Gheit, oil analyst at Oppenheimer in New York, said, “I think the settlement further weakens the government claim of gross negligence,” and that BP’s hand had been strengthened by the deal.