Despite lack of disclosure by BP about the volume of oil spilling from its well in the Gulf of Mexico, the company's agreement to create a $20 billion fund to pay claims may help BP in defending against any securities-related disclosure claims, according to securities lawyers.
Despite lack of disclosure by BP about the volume of oil spilling from its well in the Gulf of Mexico, the company's agreement to create a $20 billion fund to pay claims may help BP in defending against any securities-related disclosure claims, according to securities lawyers.
Public companies, including foreign issuers such as BP PLC, must make disclosures of material events, based on reasonable financial estimates.
BP so far has limited its disclosures in securities filings to the current costs incurred in responding to the spill.
A 5,000-barrel-per day estimate came from the unified command of government agencies responding to the spill with input from BP, said Mark Salt, a company spokesperson, "but since then, we've not had any involvement in estimating" the spill rate.
Mr. Salt said the final amount of the spill will be determined by "others" rather than the company.
Government estimates began at 1,000 barrels per day but have since grown to the current 60,000-barrel-per-day estimate
The amount could be important because BP can be fined on a per-barrel basis under the Clean Water Act.
The latest company filing, from June 21, put the cost of BP's response to date at approximately $2 billion.
"It is too early to quantify other potential costs and liabilities associated with the incident," the company said.
The announced $20 billion claim fund to be set up by BP in theory could help limit its legal exposure for any disclosure violations.
The fund and the suspension of dividends "will allow [BP] to say that is the best estimate right now and may well be a reason they did so," said Peter Chepucavage, general counsel at Plexus Consulting Group LLC.
"The government can hardly question them [since the fund was the government's] idea, so I think they have satisfied disclosure for the near term," he said.
The fund makes it look like the company is at least "making a reasonable effort to put a price tag on what this is likely to cost," said Jane Luxton, a partner and head of the sustainability, clean-technology and climate change group at Pepper Hamilton LLP, and former general counsel at the National Oceanic and Atmospheric Administration, which is involved in analyzing the spill.
But what the final cost of the spill will be remains unclear, Ms. Luxton added.
Mr. Salt declined to comment on whether the $20 billion fund could help satisfy disclosure obligations.
