BP closes Deepwater Horizon oil spill chapter with £12bn record US payout: Firm may now be subject to mega takeover
Oil giant BP has settled a massive lawsuit surrounding the 2010 Deepwater Horizon accident, agreeing yesterday to pay up to $18.7bn (£12bn) in respect of US federal, state and local claims connected with the disaster.
The payout, believed to be the largest environmental fine ever handed out, comprises $5.5bn in civil payments, $4.9bn in state claims payments, and $7.3bn in natural resource damages. The settlement will be staggered across a 17-year period.
Investors responded positively to the news, with the oil major’s shares closing up by 4.35 per cent yesterday. BP dragged the FTSE into positive territory after consecutive declines for the index over the past four sessions.
Kim Fustier at Edison Investment Research said investors had been pleasantly surprised by the agreement: “Overall it’s a better settlement than was expected.”
She pointed to the extended period of time allowed for payment, as well as the fact that most of the payments will be tax deductible. “It’s a big win for BP,” she said.
BP has been fighting numerous legal battles in the five years since the Deepwater Horizon explosion killed 11 workers and spewed oil into the Gulf of Mexico.
Yesterday BP boss Bob Dudley said the settlement made planning the future of the company and its investments “much clearer,” adding: “We’ll be able to spend more time on what we do well, which is finding, producing, developing, selling products in oil and gas.”
However, analysts touched on another option for the group last night.
Brenda Kelly at London Capital Group said: “It could very well be a takeover target.” She added that the uptick in shares yesterday was likely down to the “general expectation of M&A activity in the sector”.
Analysts are in agreement as to which rival would step in as buyer, with one London-based investment specialist saying last night: “Exxon is the only one that could buy it really.”
Hydrocarbon Capital’s Malcolm Graham-Wood said that the settlement “makes a deal more likely”, and added: “I’m sure Exxon is looking for a big deal.”
He also brushed off recent reports that the UK government might block any bid for BP, given that a large portion of its shareholders are from the US. “I’m not convinced that the government wants to get too involved with a company that’s 40 per cent owned by Americans,” he said.
Yesterday’s settlement takes away one obstacle to any potential bid, but another remains in the shape of BP’s stake in Rosneft. With Russia still under Western sanctions over fighting in Ukraine, Kelly warned that this could prove a more difficult problem to remedy. “It’s more of a geopolitical structural issue, it’s not something they could get out of quickly,” she said.