BP’s Corner-Cutting Extends to Its Finances: Alice Schroeder

Once perceived as a fortress built on low leverage and strong cash flows, BP Plc seems to have managed its balance sheet much the way it ran exploration projects -- dangerously. Projections the company is feeding investors about how much cash it will have to pay claims are finally getting the skepticism they deserve.

Andrew Gowers, the company’s head of communications in London, told Bloomberg News earlier this month that BP needs “to have an unusually strong cash position.” It owes $20 billion over four years to the escrow fund for oil spill victims, along with whatever fines, cleanup costs, other uncapped liabilities and litigation costs it must pay each year. These items will cost tens of billions -- even as much as $100 billion.