Oil giant BP is one big step closer to reviving its image — and fortunes — following the gigantic 2010 oil spill in the Gulf of Mexico that killed 11 and fouled hundreds of miles of coastline with tar.
BP has finally reached a settlement with the U.S. government in which it would pay $4.5 billion in penalties and plead guilty to 12 felonies relating to the Deepwater Horizon catastrophe, the biggest and deadliest offshore oil spill in U.S. history. If approved by a federal judge, it will be the largest criminal settlement ever.
The 2010 disaster sent BP reeling, while transfixing millions who watched in disbelief as one of the world's most sophisticated oil drillers failed repeatedly to cap a well that spewed more than 4 million barrels of oil into the Gulf. It took BP three months to cap the wellhead, which was nearly a mile below the surface of the water. A congressional committee ordered BP run 24/7 live footage from a "wellcam" that monitored the gusher of oil as it flowed into the Gulf, day after day.
The incident cost Tony Hayward, BP's CEO at the time, his job, and forced the company to aggressively sell assets to finance a $20 billion fund for compensating victims, paying out claims and bearing other costs related to the spill. BP's share price fell from about $60 prior to the spill to about $40 today, a loss of more than $60 billion in market value. BP's shares were flat on news of the settlement, which had generally been expected.
The settlement money, which also includes a lesser civil penalty, will be split among federal agencies such as the National Fish and Wildlife Foundation, the Securities and Exchange Commission and the National Science Foundation. The settlement won't cover civil lawsuits or other private claims against the U.K.-based oil producer that are still pending. BP has already agreed to about $16 billion worth of payouts, and spent another $14 billion responding to the spill.
Criminal charges may also be lodged against four individuals, according to news reports, for their role in allowing dangerous conditions to develop, which led to the explosion on the drilling rig atop the well. Charges could also include efforts to mislead Congress following the explosion.
Despite the huge hit to its finances and reputation, BP has been recovering. American Robert Dudley replaced Hayward, a Brit, in 2010. And rising oil prices have helped the company's bottom line. BP lost nearly $4 billion in 2010, but turned a profit of nearly $26 billion in 2011. Analysts expect a slightly lower profit for 2012, largely due to falling revenue. The stock price, meanwhile, has recovered somewhat from its low point of about $27 in mid-2010. And BP is once again making business deals and expanding.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.