Oil Spill's Economic Toll Estimated in the Billions

It's not just BP: Other oil companies warn investors of huge financial fallout.

May 25, 2010 — -- Drilling companies involved in the catastrophic explosion and spill in the Gulf of Mexico are putting a multi-billion price tag on the economic destruction caused by the growing slick and girding investors for the looming financial blow.

On Monday, BP put the cost of clean-up from the runaway well at more than $760 million.

But in filings that started to trickle in to the Securities and Exchange Commission last month, and have been tracked by the web site footnoted.com, a range of firms have begun warning investors about the steep costs that could flow from the unfolding disaster.

BP has told investors in its filings that "it is still too early to estimate with any degree of confidence the full future impact on BP from the spill." But there are also a range of other, lesser-known firms that had a direct stake in the Deepwater Horizon drilling operation.

Validus Holdings, Ltd., a marine and energy industry re-insurance company, estimated earlier this month that the marine and energy sectors would suffer $1.3 billion to $1.5 billion in losses from the sinking of the Deepwater Horizon, and the insurers would sustain "losses to be in the range of $38 million to $45 million."

Two companies, Anadarko Petroleum Corp. and Mitsui Oil Exploration Co., were minority partners with BP in the drilling operation. Anadarko had a 25 percent stake in the well and has filed papers confirming that the spill "could subject us to significant monetary damages and other penalties" and "may result in substantial cost increases or delays in our offshore exploration and development activities, which could materially impact our business, financial condition and results of operations."

Mitsu, which had a 10 percent stake, told investors that executives there are "unable, at this time, to determine the cause of the incident, and the impact, if any, that the incident will have on … future operating results, financial position or cash flows."

Newpark Resources, Inc., an oil and gas company supplier, described in a May 12 filing how its ongoing operations in the Gulf could be threatened by the spill. "If conditions continue to deteriorate," the filing said, "our customers may possibly be forced to curtail or cease operations in the areas impacted by the spill, resulting in less demand for our drilling fluids and waste disposal services. Further, our facilities on the coast of the Gulf of Mexico may be forced to suspend operations as a result of impacts from the spill... Either of these events could potentially result in a reduction in revenues or an increase in our costs."

Other oil industry firms that have no direct stake in the Deepwater Horizon platform are warning that the spill could bring new regulations or cause delays in future drilling enterprises that could prove costly.

ATP Oil and Gas Corp., for instance, raised concerns about the May 6 announcement from the U.S. Secretary of the Interior about a moratorium on U.S. offshore drilling permits. "We have ongoing and planned drilling operations in the deepwater Gulf of Mexico … some of which are not yet permitted," the company's filing said. "The successful execution of our business plan depends on our ability to continue drilling for and producing hydrocarbons in the Gulf of Mexico. While the moratorium is scheduled to end later this month, we cannot predict when it will end."

A number of the filings unearthed by Footnoted.Com signal the impact could spread well beyond the oil industry. The website notes a filing by West Marine, Inc., a company that sells recreational boating supplies, which warns of a "substantial impact on boating usage in the area." And another by Winn Dixie Stores, Inc., that raises concerns about a decline in tourism in the region, and thus fewer customers for their grocery stores.

David Yoskowitz, a fellow at The Harte Research Institute, a research arm of Texas A&M University-Corpus Christi, told ABC News it is almost impossible to contemplate all the ways a spill of this magnitude could impact the economy. Beyond the oil and gas industries, and fishing, boating, and tourism, Yoskowitz said his research indicates there could be more than $1.2 billion in costs that stem from the damage to wetlands "that are not accounted for in the marketplace." That's because regions effected by the spill could be forced to build new systems to compensate for the loss in storm protection and wastewater treatment provided naturally by the wetlands.

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Calculations of the impact "may take several years to play out," according to BP's filings. "The effectiveness of BP's actions to mitigate the environmental impact of the spill will be important in the final assessment of the incident and any long-term reputational damage could be significant," the company says.

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