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Gulf of Mexico costs could leave BP "vulnerable to takeover"
By Darshini Shah | Thu, 16th May 2013 - 11:19
BP (BP.) has asked Prime Minister David Cameron to help with the escalating cost of the 2010 Gulf of Mexico disaster, according to the BBC.
"According to BP sources, the rate at which cash is leaking from the company could turn into a serious new financial crisis for the company, putting at risk its dividend and making it vulnerable to a takeover by another oil company," stated BBC business editor Robert Peston.
BP hopes the Prime Minister will raise the issue with the US government at the G8 meeting in June.
The Deepwater Horizon disaster killed 11 oil-rig workers and released an estimated four million barrels of oil into the Gulf and along the coastline.
BP agreed to pay compensation to around 100,000 people and companies, including fishermen and restaurant owners, who claimed their livelihoods and health had been affected.
BP initially put aside $7.8 billion (£5.2 billion) when it agreed to pay compensation in 2012, but the oil giant now expects the final figure to be much higher, stressing that the court-approved rules under which "business economic loss" is assessed are being systematically abused.
"In practice, according to BP, [these] companies don't have to show a fall in profits as measured on normal accounting practices," Peston wrote on his blog. "All they have to show, says the court filing, is that cash flow in a specified month or months is lower than cash flow in the same month or months before the oil spill."
Malcolm Bracken, analyst at Redmayne Bentley, told the BBC that BP failed to see the consequences of the settlement when it originally set aside the provisions: "The problem is [BP has] written a blank cheque to the businesses of Louisiana and not asked them to prove causality, i.e. 'Was it the well spill that actually caused you problems at your business?'
"You can argue it is being abused, but that was the settlement they made and they are trying to wriggle out of it."
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