BP PLC's response to the Gulf of Mexico crude oil spill remains its top priority, but its top executives also are working to rebuild confidence and trust in the multinational oil company and to ensure that such an accident never happens again, they told shareholders on June 4.
BP Chairman Carl-Henric Svanberg and Chief Executive Officer Tony Hayward expressed their deep regret and sorrow for the Apr. 20 well blowout that destroyed the Deepwater Horizon semisubmersible rig and killed 11 people as well as the subsequent crude spill. Their remarks came a day after the company and other responsible parties received an initial $69.1 million bill from the US government for response and recovery operations.
As the well's owner, BP is fully responsible under the 1990 Oil Pollution Act for all costs associated with the response to the spill, including efforts to stop the leak at its source, reduce the spread of oil, protect the shoreline and mitigate damages, and long-term recovery efforts to ensure that all individuals and communities affected by the spill are made whole, the US Department of the Interior said in a late afternoon spill response update on June 3.
"The Board of BP has been clear from the outset that all resources available to the company should be applied to meeting BP's responsibilities in addressing these events," Svanberg said in London. "The task is by no means complete and we have a long way to go. This is a tough job, and Tony and the team continue to work relentlessly. They have all our support."
Hayward and other BP officials have said from the outset that BP would pay all legitimate claims and other costs associated with the accident and spill. It has already spent more than $1 billion to try to stop the leaks from the well immediately, clean up spilled oil, and drill relief wells, the company said in a statement on June 4. Those costs will largely be paid during 2010, but longer-term environmental remediation, claims, and litigation expenses "are not predictable at this stage, but they will be sizeable and are likely to be spread over many years," it added.
'For some time'
"Spending at this rate is expected to continue for some time beyond successful completion of work to stop the flow of oil from the damaged well," BP's statement noted. "Any fines and penalties would present additional costs."
The company is financially prepared to meet those costs, Hayward said on June 4. "We will also meet our obligations to our employees, and to our other stakeholders, including hundreds of thousands of shareholders, and millions more savers in mutual and pension funds, who rely on their investment in BP as part of their financial security and in many cases their retirement income," he continued. "The financial consequences of this incident will undoubtedly be severe, but BP is a strong company and we have weathered many storms before."
BP's common stock price on the New York Stock Exchange was around $38/share in mid-morning trading on June 4, 37% below its $60.48/share closing price on Apr. 20, hours before the well blew out and the rig exploded. Two major credit rating services, Fitch Rating Services and Moody's Investors Services, reduced their assessments of BP's long-term credit by one notch on June 3 and warned that further downgrades are possible.
"It remains our aim as always to strike the right balance for shareholders between current returns through the dividend, sustained investment for long term growth and maintaining a prudent gearing level," Svanberg told shareholders. "We will do all we can to protect and grow the value of the company in which you have invested."
Svanberg said BP's leadership understands the quarterly dividend's importance to the company's shareholders, and that its board would continue to make future decisions on the payout based on circumstances at the time. "All factors will be considered and the decision taken in the long-term interests of the shareholder," he said.
"We will stand by our obligations," added Hayward. "We will halt this spill and put right the damage that has been done. We will rebuild the confidence of the American people and the world in BP."
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