BP plc on Friday pledged a bundle of its U.S. Gulf of Mexico assets as collateral for the $20 billion Deepwater Horizon Oil Spill Trust, which was set up to pay for disaster claims.
The pledged collateral would be an overriding royalty interest in oil and natural gas production at the Thunder Horse, Atlantis, Mad Dog, Great White and Mars, Ursa and Na Kika offshore facilities.
"The pledging of these assets underscores our commitments to the Trust, which we set up to pay all legitimate claims arising from the tragedy," said BP America Inc. President Lamar McKay, who also is helming the company's Gulf Coast Restoration Organization.
BP created Verano Collateral Holdings LLC to hold the overriding royalty interest, which would be capped at $1.25 billion per quarter and $17 billion total. Verano will pledge the overriding royalty interest to the Trust as collateral for BP's remaining contribution obligations. No change in operatorship or production marketing is to occur from the assets, and "there will be no effect on the other partners' interests in the assets," BP said. For financial reporting purposes, Verano would be a consolidated entity of BP.
BP established the Trust and set aside assets in June. To date the company already has contributed $3 billion to the Trust and will make additional contributions of $2 billion in 4Q2010 and $1.25 billion quarterly thereafter to the end of 2013.
Several energy analysts said Friday the announcement, which indicates that BP has enough capacity to pay legitimate claims, is aimed at restoring trust among federal officials and Gulf Coast states.
Since the Macondo well was confirmed sealed on Sept. 19, BP has been plugging and abandoning the well, which involves removing portions of the casing and setting cement plugs. The company also has begun the process of dismantling and recovering containment equipment and decontaminating the vessels that were in position at the well site.
As of Friday, the cost of the April 20 Macondo well explosion stands at around $11.2 billion, BP said. The estimate includes the cost of the spill response, containment, relief well drilling, as well as claims paid and federal costs.
In August the claims process from individuals and businesses related to the incident were transferred to the Gulf Coast Claims Facility (GCCF). To date more than 86,000 claims have been submitted. More than 44,000 claims totaling $806 million have been paid, including a $34.5 million fund for real estate brokers and agents. Before the transfer to the GCCF, BP had made 127,000 claims payments, totaling about $399 million.
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