BP 2013 Annual Report Download - page 148

2. Significant event – Gulf of Mexico oil spill – continued
Under the settlement agreements with Anadarko and MOEX, and with Cameron International, the designer and manufacturer of the Deepwater
Horizon blowout preventer, with M-I L.L.C. (M-I), the mud contractor, and with Weatherford, the designer and manufacturer of the float collar used on
the Macondo well, BP has agreed to indemnify Anadarko, MOEX, Cameron, M-I and Weatherford for certain claims arising from the accident. It is
therefore possible that BP may face claims under these indemnities, but it is not currently possible to reliably measure any obligation in relation to such
claims and therefore no amount has been provided as at 31 December 2013.
The magnitude and timing of all possible obligations in relation to the Gulf of Mexico oil spill continue to be subject to a very high degree of uncertainty
as described further in Risk factors on page 51. Any such possible obligations are therefore contingent liabilities and, at present, it is not practicable to
estimate their magnitude or possible timing of payment. Furthermore, other material unanticipated obligations may arise in future in relation to the
incident.
Impact upon the group income statement
The amount of the provision recognized during the year can be reconciled to the charge to the income statement as follows:
$ million
2013 2012 2011
Cumulative since
the incident
Net increase in provision 2,239 6,868 5,183 44,551
Derecognition of provision for items that cannot be reliably estimated (379) (794) – (1,173)
Change in discount rate relating to provisions (5) –17 17
Costs charged directly to the income statement 136 257 512 4,244
Trust fund liability – discounted –– – 19,580
Change in discounting relating to trust fund liability –– 43 283
Recognition of reimbursement asset, net (1,542) (1,191) (4,038) (19,338)
Settlements credited to the income statement (19) (145) (5,517) (5,681)
(Profit) loss before interest and taxation 430 4,995 (3,800) 42,483
Finance costs 39 19 58 193
(Profit) loss before taxation 469 5,014 (3,742) 42,676
The group income statement for 2013 includes a pre-tax charge of $469 million (2012 pre-tax charge of $5,014 million) in relation to the Gulf of Mexico
oil spill. The costs charged in 2013 relate primarily to the ongoing costs of operating the Gulf Coast Restoration Organization (GCRO) and increases in
legal costs. Finance costs of $39 million (2012 $19 million) reflect the unwinding of the discount on payables and provisions. The cumulative amount
charged to the income statement to date comprises spill response costs arising in the aftermath of the incident, GCRO operating costs, amounts
charged upon initial recognition of the trust obligation, litigation, claims, environmental and legal costs not paid through the Trust, estimated obligations
for future costs that can be estimated reliably at this time and rights and obligations relating to the trust fund, net of settlements agreed with the
co-owners of the Macondo well and other third parties.
The total amount recognized in the income statement is analysed in the table below.
$ million
2013 2012 2011
Cumulative since
the incident
Trust fund liability – discounted –– – 19,580
Change in discounting relating to trust fund liability –– 43 283
Recognition of reimbursement asset (1,542) (1,191) (4,038) (19,338)
Other ––– 8
Total (credit) charge relating to the trust fund (1,542) (1,191) (3,995) 533
Environmental – amount provided 47 801 1,167 2,944
– change in discount rate relating to provisions (5) –17 17
– costs charged directly to the income statement ––– 70
Total (credit) charge relating to environmental 42 801 1,184 3,031
Spill response – amount provided (113) 109 586 11,465
– costs charged directly to the income statement –9 85 2,839
Total (credit) charge relating to spill response (113) 118 671 14,304
Litigation and claims – amount provided, net of provision derecognized 1,926 5,164 3,430 25,459
– costs charged directly to the income statement –– – 184
Total charge relating to litigation and claims 1,926 5,164 3,430 25,643
Clean Water Act penalties – amount provided –– – 3,510
Other costs charged directly to the income statement 136 248 427 1,143
Settlements credited to the income statement (19) (145) (5,517) (5,681)
(Profit) loss before interest and taxation 430 4,995 (3,800) 42,483
Finance costs 39 19 58 193
(Profit) loss before taxation 469 5,014 (3,742) 42,676
The total amounts that will ultimately be paid by BP in relation to all obligations relating to the incident are subject to significant uncertainty as
described under Provisions and contingent liabilities above.
144 BP Annual Report and Form 20-F 2013