September 22, 2019

Despite Accord, Spill Aftermath Shadows BP

The agreement, which included 14 guilty pleas and $4.5 billion in fines and other payments to be made over five years, almost certainly removes the possibility of further criminal charges.

But it still leaves BP vulnerable to larger liabilities, particularly fines for spills under the Clean Water Act. Depending on whether BP is found grossly negligent, a term which is open to considerable interpretation by courts, BP could be fined anywhere from $5 billion to $21 billion, or $1,100 to $4,300 per barrel spilled, analysts say. BP took a charge of $3.5 billion in 2010 for potential Clean Water Act claims.

“This is only an interim settlement,” said Stuart Joyner, an analyst at Investec in London. “Until we get the final settlement of civil claims,” he added, the blowout aftermath “is not going away for BP’s management or investors.”

Shares of the company closed at £416.60, or $660, in London on Friday, off from £425.40 on Thursday.

The civil issues are to be decided in a trial in New Orleans scheduled for late February. On Thursday, the U.S. attorney general, Eric H. Holder Jr., said, “We’re looking forward to the trial” in which “we intend to prove that BP was grossly negligent in causing the oil spill.”

During a conference call with analysts on Thursday, a feisty Brian Gilvray, BP’s chief financial officer, said that BP, too, was “comfortable” with a trial in Louisiana and that it had investors’ support. He also said that if found grossly negligent, BP would appeal, which he said would extend the process into 2014 or later.

“The feedback from our investors is that we have the support of our investors to actually fight this case unless we believe we can come up with a fair and reasonable settlement,” Mr. Gilvray said.

On Friday, Bernstein Research estimated the cost of the spill to BP at $41.9 billion to $59.4 billion, depending on the various legal outcomes. That amount comprises all fines and litigation costs, minus settlements BP has received from various parties involved in the incident.

There is also some risk that BP, because it has admitted to a range of felonies and negligence, may be barred from further contracting with the U.S. government. In a statement Thursday, the company said, “Under U.S. law, companies convicted of certain criminal acts can be debarred from contracting for the federal government.”

Mr. Gilvray said during the call that any move to ban BP would prompt it to rethink investing in the United States. The company said Thursday that it had “not been advised of the intention of any federal agency to suspend or debar the company in connection with the plea agreement.”

BP’s U.S. business is of great importance to the company. Its output of oil and natural gas in the country represented 28 percent of its global production, excluding Russia, in the third quarter, and about 20 percent of the profits in its key exploration and production unit.

BP says it has invested $52 billion in the United States over the past five years, more than in any other country, and employs 23,000 Americans.

The company’s North American center in a suburban Houston office park is a major hub of the company, housing the Americas exploration teams and a large computer center for crunching data on the difficult-to-fathom oil fields in the Gulf of Mexico and elsewhere.

The heart of its business is the Gulf of Mexico, where BP, according to the company, holds the most oil leases. BP’s operations in the gulf, which are among its most profitable, are still a long way from coming back from the spill. For instance, production from BP-operated Gulf of Mexico fields is averaging about 150,000 barrels a day of oil equivalent, according to a company spokesman, down about two-thirds from before the spill.

The slump is largely due to the drilling moratorium imposed after the Gulf of Mexico blowout, which prevented the routine maintenance drilling required to support production.

BP said it expected output in the Gulf of Mexico to be flat next year on the so-called core fields it has retained. Thereafter, it expected output to rise steadily.

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