What's going on?

British energy giant BP said on Tuesday that it would take a $1.7 billion charge relating to the infamous 2010 Deepwater Horizon oil spill � pushing its total Deepwater payouts above the $65 billion BP most recently estimated it would cost.

What does this mean?

BP has paid out billions in various claims and fines following the spill. The most complicated (and expensive) claims from affected businesses along the American Gulf Coast are among the last of the 390,000 to be settled. The bad news is that the costs are coming in about $1 billion higher than expected; though the good news for BP is that, with 99% of the Deepwater claims processed, the expense and uncertainty involved appears to now be coming to an end.

Why should I care?

For markets: Investors appeared a little surprised by the news.

BP�s stock sold off by almost 3% on Tuesday. It was the worst performer among big energy companies globally, which suggests that investors were stung by the higher-than-anticipated cost. One fear is that the remaining settlement costs will also come in larger than expected. If not, the impact on BP�s share price should be minimal (in the view of most research analysts). Tuesday�s hefty $1.7 billion, for example, isn�t expected to impact BP�s ongoing buyback of its own shares (which is helping to support its share price).


The bigger picture: It�s been a good month for oil companies.

Even with Tuesday�s news, BP�s �break-even� oil price will likely be somewhere in the low-to-mid-$50s (per barrel). With the oil price currently at a two-and-a-half-year high of around $70, BP and its contemporaries � which have spent years slashing their costs � are better placed to generate profits than they have been in a long time. It�s no surprise, then, that energy companies are among the best-performing stocks so far this year.