BP faces new R180 billion fines for Gulf Of Mexico disaster

By on September 8, 2014

The energy giant ruled ‘grossly negligent’ for Deepwater Horizon blowout, wiping another R50 billion off its share price. BP faces potential fines of up to R180 billion for the 2010 Gulf of Mexico oil rig explosion, which caused vast spills and killed 11 workers, with a court in New Orleans declaring the company reckless and grossly negligent. The news caused its share price to drop six percent – its steepest drop since June 2010. The court said 67 percent of the blame rested with the beleaguered energy giant, 30 percent with its US rig operator, Transocean, and three percent with Halliburton. BP had been confident it wouldn’t be judged so harshly. Yet the judge also said that BP could

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be liable for punitive damages from other claims, meaning that others whose interests had been damaged by the spill – the shrimp fishermen of the area, for example – could yet sue too. This is one of those on-going nightmares that, were BP a person, it would be desperately wishing it could wake up from. The company had earlier settled a criminal case with a R40 billion fine after pleading guilty to 14 federal charges, including manslaughter for the 11 deaths – plus obstructing Congress in its investigations into the spill. And there was a further R92 billion settlement with civil claimants in 2012. Meanwhile its share price has never recovered from the disaster, it was banned from taking US government contracts for a while, and in its weakened state it has since been tipped periodically as a takeover target. Add in the Texas City refinery fire, spills in Alaska and the recent decision to take a 20 percent stake in Rosneft, the Kremlin-controlled oil company. How do you come back from that? Well, for a start it helps if you’re not a person, but an energy giant. While the firm has already paid out or set aside more than R430 billion in penalties or compensation, analysts reckon that BP should be able to meet the cost of these extra fines without major asset sales or a big cut in its dividend. Let’s recap that figure again: That’s up to R180 billion. Which puts those stressful parking tickets the rest of us grumble about into perspective. Despite shrinking profits across the oil sector, BP had more than R270 billion in cash and equivalents on its balance sheet at the end of the second quarter. BP is also planning to appeal the ruling, a process that may well drag on and delay the payment of fines for years. Meanwhile the judge has yet to rule how much oil was spilled, which will of course impact the decision of how much BP has to pay. The consensus suggests the eventual fine is likely to come in far short of the R180 billion mark. As such, while it’s hardly good news, it won’t necessitate a change in course for BP, which has already undertaken a wave of asset sales in 2010-12. BP’s trading fortunes have also picked up of late, with second quarter replacement cost profits, which strip out volatility in oil prices, up 33 percent to R32 billion from the equivalent period last year. Which is good news for BP, but unlikely to do much for those groups whose livelihoods and environment have been irreversibly hit by the accident.

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