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Impacts Of Financial Condition: Deepwater Horizon Oil Spill

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Discuss about The Impacts of financial condition of BP's Response to the Deepwater Horizon Oil Spill.




In this case study, here we can get a clear idea about the financial impacts of the response of BP to the deep water horizon oil spill. This deep water horizon oil spill is also known as or called as the BP Oil Spill or the Gulf of Mexico Oil Spill. This oil spill is the largest marine oil spill in the history of US. This oil spill occurred due to the explosion or sudden increase of oil platform in the Deep Water Horizon Offshore towards southeast to the delta of the Mississippi River about 50 miles on the date 20th April 2010. After applying hard effort, they failed to stop or block the leak. On the date of 15th July for the first time within 86 days BP said that the leakage has been blocked and restrict the flow of the oil into the Gulf of Mexico. However, due to the rapid increase in the rate of oil it causes debate or dispute. From the recent result, it can be said that hardly near 5 million numbers of barrels of oil are released or unrestricted by the Macondo well, along with nearly 4.2 million numbers of barrels which are poured into the water of Gulf of Mexico. The principle or main developer of the Macondo Prospect Oil Field was BP. In this oil field, a huge accident has occurred. This Deep Water Horizon is owned by the Transocean Ltd. Company (Bard, 2015). This Transocean Ltd. The company signed an agreement or contract with BP about the matter for drilling a well which is exploratory. While the explosion occurs, then both the Transocean Ltd. Company and the BP are continued and attached with the job for closing or blocking the well in expectation of the later product. The explosion occurs just while Halliburton has just completed cementing at the time of casing the well. BP, the US government, was that particular party who are responsible for this incident and also the BP pay for the accounts of all cost regarding the cleaning of the oil spill. However, the BP accepts and takes all the responsibilities of this oil spilling and also bears the cleanup costs. But, currently, it is determined and declared that both the Transocean Ltd. Company and Halliburton are also considered as convicted or accused of this disaster or this incident of oil spilling.

Main Body

Financial implication

On the date 1st February 2011, the BP declared or released the income statement of their group for the 4th quarter of the year 2010. This income statement shows a charge of pre-tax of the amount of US $40.9 billion which is related along with the Deep Water Horizon Oil Spill. It also includes the cost of US $17.7 billion which is effectively incurred for the year of 2010. All of these charges which are related to this incident have been considered as non-operating items which are deduced or figure out from the related tax income ("NOAA Deepwater Horizon/BP Oil Spill Response", 2011). This income includes US$ 20 billion escrow amount. For the next 3.5 years, the BP also has agreed to establish them by selling the US assets. By the help of this escrow account they can solve all of their legal claims which are judged or arbitrated by the Gulf Coast Claims Facility (GCCF), the costs which are related to the damages of natural resource, settlement of the litigations and the final judgments or decisions in that particular litigation and the costs of local and state response or those who are the comebacker. For a 10-year research program the BP, the US government has wanted to raise the fund and for that, they give or donate $500 million to them for studying the impact of the Gulf of Mexico Oil Spill and the costs which are associated or related to the response of the ecosystem of the marine and offshore (Barron, 2011). The BP group also shows their interest and decided to fund $360 million at a cost of six numbers of berms which are utilized in the project of Louisiana Barrier Islands. Though, the charge does not show any amounts which are related to the penalties and fines, not including those amounts which arise from the liability which is considered under the act of Clean Water Act. BP, the US government, has argued that it was not so easy to estimate or calculate consistently either the timing or the amount of such types of particular additional amounts (McCay, 2011). On another hand, the important uncertainty considering the whole amounts of the company which will have to pay US$20 billion escrow account which cannot represent or symbolize a cap of liability. In the year of 2010, according to BP, the final exposure will be dependent or reliant on many aspects or factors which include the amount of the oil which is ultimately discharged, the date of the flow of hydrocarbons from the well of MC252 which is permanently halted, the nature, amount and number of claims which arise finally and the amount of time which is taken during the time of performing the activities of clean-up.


Ecological and Socio-Economic Damages

The economic and ecological impacts of deep water horizon oil spilling are a very tough procedure to estimate both time and space. Regarding to the Costanaza et al. (2010) the spill of oil in the sea shore indirectly and directly affected more than 20 categories of the ecosystem in and around of the Mexico Gulf and it also incorporated  non-marketed like climate regulation, hurricane storm is protected by the coastal wetlands, aesthetic, cultural and recreational values. The assignment represents to estimate a total value of the ecosystem for Mississippi River delta in the range of US$12-47 billion per annum (Briggs, 2011). If someone states that it needs to be the critically affected area and ecosystem reduced in this region is 10-15% provided by the deltas consequences of oil spill ling and the loss value of the ecosystem is around $1.2- $23.5% per annum. Moreover, government trustees’ board understandably needs to have considered difficult to rigorously lose the ecosystem services and goods. The methodological end results and the foundations of these types of studies are highly contested through the stakeholders. Agencies have reflected a various type of practical ways to assess the damages. The resource replacement price approach, it also indicates to achieve the goal is to transfer lost ecological and economic prosperity via restoration process. However, to solicit restoration birds to use the monetary costs like a real focus to harm negotiations and they need to avoid measuring the social prosperity or the wealth which was crucially lost. Moreover, the biophysical damages in this scenario are predictable or the obvious. According to the Boyd, the possibility which is damaged physically is strictly underestimated the demonstrating challenges that are providing casually and closely related to the effects. The economic issues that prices are not the similar like benefits or the profits. A reflection on restoration values to an estimate of the affecting regions or the damages need to lead both under deterrence and over to depend on the relationship between the restoration values to the true social value of their physical damages. However, the procedure to measure the services of the ecosystem reach more mature plaintiffs, courts, phase and trustees need likely a powerful machinery tools to their hands for the legal responsibility of the marine damages. To provide the recent economic and the scientific knowledge, the penalties scale is commonly are need to resolve as the political negotiations than their technical measurement. This type of explanation that why the BP neither show the details of the social damages of the ecosystem nor to underlie the tabulation of procedures of pre-tax charges like US$40.9 billion.  There’s have such information need to have been severe assess the pertinence of the globally charged and also to understand the amplitude of the efforts of restoration to their ecosystem values and the assets that may need to have lost [partially or temporarily impaired  (Kurtz, 2013). In this context, the accounting advantages to deduct from the taxable income the considerable non-accounting charge, the organization BP Limited represents need not to offer the stakeholders with the full image of the social, financial and the environmental implications of this scenario the deep water horizon oil spilling.

More Reliable Environmental Accounting and Reporting

In this scenario, the deep water horizon oil spilling is more likely to consequences to more stringent regulation of gas and oil activities in the country US, and related with the safety and health protections and also the environmental oversight and control of the drilling part or the region. Bp Ltd Company reflects the significant and importance uncertainties over their extent and also the timing of legal responsibility, and the costs are closely related to the incident and the modifications in the operating and the regulatory environment which need to result from the incidents and also increased the risks that the group needs to expose (Henkel, Sigel, & Taylor, 2014). The uncertainties are common to continue it for a specific  period. The risks are present and also are expected to have an adverse material resulting in the prospects, group's business, cash flows, liquidity, and competitive position and also the shareholders return the rectification of their strategic agenda. The up to date trends and the status of the ecosystems with the reports and this one is operated by an entity. The ecological and social externalities of reporting by an entity and it also regards to the impacts and the dependencies on all of the ecosystem services. Regarding the Assessment of the Environmental Impact the procedures mostly used to design the ecosystem and the biodiversity services offset considers that is denoted as ecological equivalencies between the realized offset and the and what is the exact lost (Kiefer, Kauffman, & Long, 2011). In the other hand, the assessment of the systematic of the ex-post of the ecological efficiency of measures of all the mitigation that include of the offsets mentioned above.


The deep water Horizon oil spilling known as the Mexico Gulf oil spilling or the BP oil spilling is one of the largest marine oil spilling in the history of US. The main caused by an explosion on the Deepwater Horizon offshore oil stage around 50 miles of the delta of Mississippi River. In this scenario, the financial implications of the organizations BP company are legally responsible to the deep water horizon oil spills, it also assesses the socio-economic and the ecological damages, and also the environmental reporting and accounting.



Bard, S. (2015). Podcast: The 5th anniversary of the Deepwater Horizon oil spill. Science.

Barron, M. (2011). Ecological Impacts of the Deepwater Horizon Oil Spill: Implications for Immunotoxicity. Toxicologic Pathology, 40(2), 315-320.

Briggs, W. (2011). Deepwater Horizon Response Unified Area Command Transition Framework.International Oil Spill Conference Proceedings, 2011(1), abs264.

Henkel, J., Sigel, B., & Taylor, C. (2014). Oiling rates and condition indices of shorebirds on the northern Gulf of Mexico following the Deepwater Horizon oil spill. J. Field Ornithol., 85(4), 408-420.

Kiefer, K., Kauffman, M., & Long, J. (2011). International Assistance: Deepwater Horizon Oil Spill Response. International Oil Spill Conference Proceedings, 2011(1), abs274.

Kurtz, R. (2013). Oil Spill Causation and the Deepwater Horizon Spill. Review Of Policy Research,30(4), 366-380.

McCay, D. (2011). Modeling Subsurface Oil Transport and Concentrations during the Response to the Deepwater Horizon Oil Spill. International Oil Spill Conference Proceedings, 2011(1), abs419.

NOAA Deepwater Horizon/BP Oil Spill Response. (2011). Choice Reviews Online, 48(08), 48-4510-48-4510.


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