BP's Daily Tally: $17.5M for Spill, $93M in Profits

Updated: 9 hours 39 minutes ago

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Paul Wachter Contributor

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(May 11) -- BP said Monday that it has spent $350 million on its cleanup efforts in the first 20 days of the oil spill that began when a rig it operated in the Gulf of Mexico exploded. That sounds like a lot -- $17.5 million per day -- until you consider the firm's profits over the same time period: In the first quarter of the year, BP's average daily profit was $93 million.

While the London-based company's stock has taken a 19 percent hit since the oil spill began, industry analysts believe the company, one of the world's five largest, will survive and even prosper. In fact, a Citigroup analyst group has advised people to buy BP stock, The Washington Post reported. "Reaction to the Gulf of Mexico oil leak is a buying opportunity," Citigroup advised.

Mark Wilson, Getty Images

Lamar McKay, right, president and chairman of BP America Inc., and David Nagel, executive vice president of BP America, wait to testify Tuesday at a Senate panel hearing on the Gulf of Mexico oil spill. BP is expected to prosper despite the disaster.

This is not to suggest that BP will get away completely unscathed. The Deepwater spill comes at a time when Washington, taking a cue from public sentiment, is moving to hold companies accountable for their missteps. Last month, federal prosecutors launched a criminal investigation of Goldman Sachs. And after reports of Toyota's faulty-brake pedals causing accidents, the car company received a public flogging and federal fines.

But the damage caused by the alleged misdeeds of Wall Street and Toyota may pale next to the cost of the environmental devastation caused by the oil spill, which continues as BP struggles to stop the leak. Yet legislation passed in 1990 caps the damages BP can pay at $75 million, a figure that even BP executives believe is too low. "A $75 million liability is not where our head is at this moment," said executive vice president David Nagel.

Today, the Senate began grilling executives of BP and two other companies involved in the drilling at the Deepwater Horizon rig. Their prepared testimonies included numerous attempts to shift the blame. Lamar McKay, chairman of BP America, said that a 450-pound blowout protector failed to operate, and the protector was owned by Transocean Ltd., which also owns the rig. (BP was in charge of operating the rig.)

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Meanwhile, Transocean CEO Steve Newman pointed his finger right back at BP. "Offshore oil and gas production projects begin and end with the operator, in this case BP," he said, adding that there was no reason to believe that the blowout protector wasn't operational. Newman also pointed to Halliburton, a subcontractor that encased the well pipe in cement. But a Halliburton executive defended his company's role, saying that it conducted the work according to BP's specifications and industry standards.

The oil spill, like the financial crisis and Toyota's faulty cars, was a man-made disaster. It is directly responsible for the deaths of 11 people, the rig workers who perished in the April 20 explosion. The financial damages will be staggering. "This is going to be protracted and consume years, and the liability will have to [be] measured in the billions of dollars. The only question is [is] it in the tens of billions or hundreds of billions," said David Kotok of Cumberland Advisors. And there's also the environmental damage to consider.

Democrats in Congress are now backing a bill that would raise the cap on economic damages related to oil spills to $10 billion in addition to the cleanup costs that the responsible party already must pay. Even it if it passes, though, recent history suggests BP will continue to thrive. After all, Goldman Sachs just announced that for the first time in its 140-year history, the firm finished a quarter without a single trading loss. And on Tuesday, Toyota announced that it made a $2.2 billion profit for the year.