Not always the case... you can try running the car for awhile to attempt to clear out the cats. We had a Volvo that was really bad that had a turbo failure and dumped a ton of oil into the exhaust (at the indy I worked at) that took literally a week of running/driving to stop smoking. But once it did clear... all was well. Might be worth a shot before replacing the expensive cat... can't hurt.

1+,

Fix the cat ONLY when you have to.

+1. Had same issue in February 2013 with my son’s 2001 530i. Followed same steps as cn90 provided earlier in the thread. Adding few comments based on the personal experience:

- Remove all 6 spark plugs. BTW, I use NGK Iridium if you want to search forum for that.

- Place a rag in each spark plug hole (to prevent the mess), then do a few quick cranking (2-3 sec each time) to expel the oil from the cylinders. There was huge amount of oil that came out from the cylinders – all rugs were blown away and the entire garage wall was covered with oil! I recommend suck as much as possible oil from the cylinders with the hand vacuum pimp, then spin engine few turns by hand (This will allow oil from the intake manifold to leak down into cylinders) then suck oil again. Then precede with the few seconds cranks using starter motor. I would still cover spark plug holes area with the heavy rugs to avoid the potential mess!
- Then do compression test in each cylinder, hopefully you didn't blow the head gasket or worse bent a rod.

- If nothing abnormal, then do the CCV overhaul (info in forum): basically new Oil Separator, and all associated hoses.

- Don't forget to add oil later.
- In my case, the residual oil made engine very difficult to start for the first time after the repair – keep cranking with the wide open throttle until it starts.
- The converters was full with oil and car was smoking like a steam train for at least 10 miles (Go for the first start-up /road test after dark, so not to scare neighbors)
- I did the full scan few weeks later using DIS and other OBDII tools and to my surprise both O2 sensors and cats operated with no issues.
- Good luck!

Update
 

Okay, so I finally managed to:

Vacuum cylinders through the spark plug holes. Once no more oil in cylinders I cranked the motor and a still got quite a bit of oil splashing everywhere causing a big mess.

Cranked the engine a few times until no more oil geysers

Replaced the CCV and it's associated 4 hoses

I did not do a compression test because I don't know how, nor know what it will tell me

Outstanding, and on schedule for Monday, is replace the throttle body gasket then install throttle body, hoses, and air box back in place. Then replace valve cover gasket since it cracked and was leaking and new spark plugs.

Anything else before trying to start it?

I would take out and thoroughly clean dipstick tube, or better to replace it with the cold climate version to minimize chance of another hydrolock. As for the compression test - it is just a diagnostic step to confirm that hydrolock did not caused damage to the internal engine parts - rods, pistons or valves. The uniform compression reading from all cylinders usually indicate that critical internal parts were not damaged. There are plenty of information on the Internet describing how to perform compression test. Good luck with your repair.

Also, you can modify the CCV system using the mod by BavarianE39:

M54-M52TU DIY Solution to the troublesome CCV system, (Pic Heavy))

Compression test inconsistent
 

Ok so decided to do a compression test.
With all Spark plugs out readings are from Cyl. 1-6 as follows 170 250 170 185 200 260

Quite inconsistent and seems high. I was expecting in the 160-170 range or if any damage the reading would be lower than say 140.

Although I vacuumed all the oil out of the cylinders, there is still some residue, and the nipple of the compression tester comes out with oil on it particularly on those cyl with high reading.

Any thoughts?

I think you will be fine. Defiantly no bent valves. As far as 250+ readings, seems like excess of oil in the cylinders create tight seal between rings and cylinder wall.

There should only be a 5% difference between the readings. I would be concern with the low readings. Valve might might have been bent, but the other items that can bend are the connecting rods or you might have a head gasket leak. Remember oil like any fluid is not compressible so when the cylinder was full of oil that force has to go somewhere.

Started but running quite rough
 

Now then, ran out of ideas what to inspect next, so attempted to start the car. It started without much effort, lots of drama from smoke for about 10 minutes.

Car is running with the following problems:
1- idle rough. It sometimes dies when coming to a stop
2- power seems to be there
3- CEL is on
4- Traction control light was on but it turned off now. Possibly due to towing.
5- When driving it feels very rough, like a fouled up plug. I did put in new spark plugs before starting it up.

Where to now, St. Peter, for I am in your hands now?