A government report into the Gulf of Mexico oil spill may lead to BP shelling out $30bn in legal settlements.
The investigation by the U.S. Coast Guard and Bureau of Ocean Energy Management, Regulation and Enforcement into the Macondo well explosion which led to the death of 11 men and the biggest offshore oil spill in U.S. history, put most of the blame on BP.
Both this report and the Presidential panel's findings pointed to mistakes made by BP's contractors, driller Transocean and cement specialist Halliburton.
BP may be forced to face the Department of Justice and several civil claimants in court.
"We would like everything settled as soon as we can, otherwise you have lingering reputation issues and investor uncertainty," one insider said after the latest report.
BP declined to comment on its legal strategy.
Companies often drag out litigation, as payments in the future have less value than payments now.
Exxon Mobil fought claims related to the 1989 Valdez spill for almost 20 years, and in the end was largely successful.
BP's case is not seen to be as strong, as official investigations have put most of the blame for Macondo on BP management structures and decisions.
The man hearing the civil damages claims against BP, Judge Carl Barbier, has set a February trial date.
BP is likely to make a "significant" offer soon afterwards, the insider said.
"I expect that early next year you will see the mother of all settlements," another source close to the company said.
BP estimates the cost of the oil spill will end up at around $42bn, including all environmental costs, compensation, legal claims and fines, and has already spent around $25 billion.
It has paid around $7 billion to compensate fishermen, hoteliers and cruise ship owners, mainly through the $20bn fund it created under President Barack Obama's direction, and expects to pay out another $7.4 billion, according to its regulatory filings.
Lawyer Brent Coon, who is representing some of the claimants, says that from what he has seen, actual economic damages could be much higher.
"So far they've been handling mainly the smaller cases," he said, adding that he expects BP to be forced to pay out another $10-20bn to cover economic claims.
Some legal experts believe the total could even be much higher, and if BP is found to have been grossly negligent, which it denies, it could be fined over $21bn.
BP's provision also includes $3.5bn related to Clean Water Act fines.
The government had previously indicated before the release of the reports that it would press for the higher level of fines associated with gross negligence.
However, the oil industry lobby's growing strength in recent months, combined with the Obama administration's wish to see the case resolved well before presidential elections in November 2012 could mean the DoJ accepts a discount to the maximum fine.
Nonetheless, a fine of over $10bn is possible, lawyers say.
BP's provision also excludes punitive damages but Judge Barbier has ruled these can be claimed, at least in relation to maritime-related cases, such as losses by fishermen, which Coon estimated at around $5bn.
While recent awards have generally seen punitive damages awarded at levels equal to or less than actual economic damages, Zygmunt Plater, Professor at the Boston College Law school, said claimants could receive a multiple of any compensatory award because the latest government report linked the accident to BP's cost-cutting efforts.
Even at a 1:1 punitive-to-economic damage ratio, BP may have to offer an additional $5bn to cover punitive awards.
Combined, it appears BP may have to put over $30bn on the table to cover the DoJ and civil claimant cases against it - some $20bn above what it has budgeted for.
Plater, however, said the risk of a court awarding much more meant that if BP could put all criminal and civil cases against it to rest for $40bn, it should jump at the chance.
Such sums are substantial even for a company with a market capitalisation of $114bn.
BP's share price, which has failed to rebound since the well was capped, is already factoring in a bigger final bill.
Analysts said the discount to rivals suggests investors are pricing in pre-tax costs, above what has already been spent, of around $60bn.
"The key issue in the BP investment case is the resolution of the Macondo liability," UBS analysts said in a research note this week.
"We believe this will be critical in derisking the valuation of BP, freeing management to address strategic challenges."
Nonetheless, BP insiders say the company is not willing to offer any amount to win legal peace.
A third source familiar with the company's thinking said the period around February could represent a window for cutting deals, but that if claimants were not "reasonable", the company could take the Exxon route and litigate for ten or 20 years.