Dave Martin/Associated Press
Residue of the Gulf oil spill in Alabama. BP said the deal it reached for cleaning up the mess was being misinterpreted.
HOUSTON — Three years after its disastrous oil rig accident in the Gulf of Mexico, BP has managed to strengthen its finances by divesting itself of less profitable operations, ramping up new oil production in the North Sea and Angola and reducing its exposure to volatile investments in Russia.
But one wild card continues to menace the company: BP's bill to compensate thousands of Gulf spill claimants is spiraling beyond what it expected and could take billions of dollars out of its future earnings.
In an effort to limit its exposure, BP has told a federal appeals court that a claims administrator misinterpreted the terms of a multibillion-dollar settlement reached last year arising out of the 2010 Deepwater Horizon rig explosion and oil spill that took 11 lives and soiled Gulf beaches. A decision by the Court of Appeals for the Fifth Circuit in New Orleans is expected within the next few weeks.
According to BP, many businesses are securing settlements for exaggerated or even fictitious losses.
"Irreparable injustices are taking place," Theodore B. Olson, the former solicitor general, who is representing BP, told the appeals court on Monday. He warned of a "hemorrhaging of possibly billions of dollars" because of the administrator's miscalculation of business losses following the spill.
The plaintiffs' lawyers dispute the claim, saying that BP is trying to back away from a settlement it negotiated, co-wrote and agreed to.
BP has taken a charge of $42.2 billion for cleanup costs, fines and other compensation. It initially estimated that it would pay $7.8 billion to Gulf coast businesses and residents, a total it has increased to $8.2 billion excluding future business loss claims that the company says it cannot yet estimate.
There is no cap to the settlements. The claims continue to rise while awards have been significantly higher than the company had expected. The administrator can accept new claims until next April. Nearly $4 billion has been paid out so far on more than 44,000 eligible claims.
Estimates of how much BP may have to pay out to businesses range widely, but it could easily top the $1.7 billion the company still has in a reserve by hundreds of millions if not billions of dollars.
At the same time, BP faces another significant potential liability. Billions of dollars in fines under the Clean Water Act still hang in the balance in Judge Carl Barbier's New Orleans federal courtroom, depending on whether he decides BP, along with its contractors Halliburton and Transocean, engaged in gross negligence or willful misconduct before the calamitous rig explosion. The second phase of the civil trial, starting in September, will determine how much oil actually spilled.
If BP is found to be grossly negligent and receives a maximum fine under the federal Clean Water Act, the company could face as much as $14 billion in penalties depending on how much oil flooded into the Gulf and how much blame is apportioned to BP and the contractors, according to Stephen Simko, a senior Morningstar analyst.
BP last year agreed to plead guilty to 14 criminal counts and will pay $4 billion over five years in a settlement with the Justice Department. Two company well-site supervisors who were aboard the Deepwater Horizon and a former vice president of exploration in the Gulf also face trials on an assortment of criminal charges.
But oil company analysts are optimistic that a company that appeared to be in mortal danger in the months after the accident can now bear the financial burdens unless oil prices fall considerably — albeit as a company that is much reduced in size from the one before the accident.
"It will cost them more money but BP can afford it," said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Company. "Even with this accident, BP remains the world leader in deepwater drilling. They have an offshore India gas position that could significantly boost its market value over the years, and before you know it the company will be one of the foremost explorers in the Arctic."
BP has proved to be a formidable moneymaking machine capable of weathering the storm. Between 2010 and 2012, BP conducted something of a garage sale of oil and gas fields that its leaders considered superfluous, pulling in about $38 billion, only a few billion dollars short of what it has estimated that it will pay out in Gulf spill damages.
As of last March the company had about $28 billion in cash, and it has resumed paying dividends.
Clifford Krauss reported from Houston and Stanley Reed from London.
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