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Economy & Business

As Clean-Up And Legal Costs Rise, BP's Stock Price Continues To Plummet

In The Guardian, Julia Kollewe notes "shares in BP hit a 14-year low this morning after the oil giant revealed that its bill for containing and cleaning up the oil spill in the Gulf of Mexico -- the worst in US history -- had climbed to $2.35 billion."

On its website, in its daily update, the energy company says that, "to date, almost 74,000 claims have been filed and more than 39,000 payments have been made, totalling almost $126 million."

The cost of the response to date amounts to approximately $2.35 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs. On June 16, BP announced an agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill. It is too early to quantify other potential costs and liabilities associated with the incident.

That last sentence -- "It is too early to quantify other potential costs and liabilities associated with the incident." -- is key.

On June 16, The New York Times gave us a sense of the grimness of BP's financial picture.

As BP watches its bill rise quickly for the oil spill, including $20 billion it is setting aside for claims, it could find the tally growing much faster in coming months if the United States Department of Justice files criminal charges against the company."

Based on the latest estimates, for example, the daily civil fine for the escaping oil could be $280 million.  But criminal penalties, if imposed, could cause the costs to balloon still further, said David M. Uhlmann, a law professor at the University of Michigan, who headed the environmental crimes section of the Justice Department from 2000 to 2007.

Does anyone have any idea how much all this will cost?  The Times quotes Pavel Molchanov, an analyst at Raymond James, who thinks the total legal costs could reach nearly $63 billion.

MarketWatch reports "BP will attempt to raise more cash to deal with the disaster through a $10 billion debt offering as early as this week."

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