By Ed Ballard 

LONDON-- BP PLC on Thursday said it agreed to pay $18.7 billion over 18 years to settle all federal and state claims arising from the Deepwater Horizon oil spill, ending a significant portion of litigation still outstanding from the deadly accident five years ago.

BP said the agreement involved the states of Alabama, Louisiana, Florida, Mississippi and Texas as well as claims made by 400 local government entities. As part of the deal, BP agreed to pay a civil penalty of $5.5 billion under the U.S. Clean Water Act, payable over 15 years. It also agreed to pay $7.1 billion to the U.S. and five Gulf states over 15 years, and $4.9 billion to be paid over 18 years to settle economic and other claims made by the five Gulf states.

Shares in BP climbed 4% after the announcement, gaining 20 pence to trade at 439 pence in early afternoon trading in London.

"Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise," BP Chairman Carl-Henric Svanberg said.

"We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company's largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved," he added.

Write to Ed Ballard at ed.ballard@wsj.com

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