Is BP Ready to Move On?
Shares of British Petroleum (NYSE:BP) lost half their value in less than a month after the 2010 Deepwater Horizon disaster, and haven’t climbed past $50 per share in the two years since. Understandably, investors wanted nothing to do with BP, or its partners in the operation: Transocean (NYSE:RIG), which owned the Deepwater Horizon rig, and Halliburton (NYSE:HAL), which provided cementing services for the project.
All three companies have been sued up and down the Gulf Coast, but as one of the world’s oil supermajors, BP is demonstrating its ability to slowly and competently recover. Massive liability from pending litigation from thousands of plaintiffs and the U.S. government is slowly being eased as cases are settled, and on Thursday BP settled the largest criminal case against it.
According to the Washington Post, BP has pleaded guilty to a felony count of misconduct or neglect for each of the 11 lives lost during the disaster. The company will pay $4 billion over five years to the Department of Justice, as well as $525 million over three years to the Securities and Exchange Commission.
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This particular settlement is just one facet of a massive legal architecture brought against BP as a result of the spill. BP has already paid at least $8 billion in damages so far, and faces up to $7.8 billion in civil settlement claims from at least 100,000 plaintiffs in the Gulf region. The company also faces as much as $17 billion in penalties from the U.S. government under the Clean Water Act. BP has charged over $40 billion against its earnings for damages related to the disaster.
If it is established that BP was criminally negligent in performing safety checks, then it will likely have to pay the full penalty. As mentioned, it’s also possible that some staff could face manslaughter charges. While every oil supermajor has some litigation in its history, BP is quickly becoming undisputed king of the lawsuit mountain. The company has a growing history of being charged with criminal neglect regarding its safety and maintenance procedures in the United States, previously at a Texas refinery and recently in Alaska.
Despite the liability associated with these fines, the idea of putting the incident in the past is encouraging to investors looking for BP to recover to pre-disaster levels. BP’s growth has been stunted over the past few years as it works to undo as much damage as possible, but the company remains committed to creating value for its shareholders. Steadily rising dividends and aggressive plans for growth in the coming years promise to reward shareholders who have roughed out the hard times, and are ready to see a new BP heading into the future.
While heavily traded in the morning, the stock price has moved less than a percent on the news.
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