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BP has finally settled Deepwater Horizon Case

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Shares in oil giant BP climb on news it has finally settled long-running US court case over Deepwater Horizon explosion and oil spill

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Dudley dismissed market talk of a takeover of BP and said BP is ‘neither prey nor predator’. A clause in the settlement with the US means that if BP were sold to another company the fine would be payable immediately – putting off any potential suitor.

By LAURA CHESTERS FOR THE DAILY MAIL: 2 July 2015

Shares in oil giant BP climbed nearly 5 per cent following a relief rally on news it had finally settled its long-running US court case over the Deepwater Horizon explosion and oil spill that killed 11 workers five years ago.

A record £12bn fine will settle all US federal, state and local claims for the Gulf of Mexico disaster, with payments spread over 18 years – working out at £700m a year.

BP’s shares are down a third since the explosion at the Macondo oil field in the Gulf of Mexico in April 2010. Concerns about the ongoing liability of the spill and the falling oil price since last year weighed on the shares.

Tony Cross, a market analyst at investment website Trustnet Direct, said: ‘Investors are seemingly convinced that this draws a line under the affair.’

The agreement with federal authorities as well as the states of Alabama, Florida, Louisiana, Mississippi and Texas also covers over 400 local government bodies.

But it does not cover two other cases, one with landowners from the area and one class action case with a group of shareholders. However, the deal does cover the bulk of claims.

It is expected the agreement will be finalised by next year.

BP’s group chief executive Bob Dudley, said: ‘When concluded, this will resolve not only the Clean Water Act proceedings but also the natural resource damage claims as well as other claims brought by Gulf states and local government entities… it provides clarity and certainty for all parties.’

The fallout from the fatal disaster claimed the job of the then chief executive Tony Hayward, who handled the disaster poorly and was heavily criticised for a number of PR gaffes at the time.

BP chairman Carl-Henric Svanberg, who was subjected to a humiliating grilling in the US directly after the spill, said: ‘It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved.’

Shares in the oil business fell more than 50 per cent when the Deepwater Horizon rig caught fire and sank and shares continued to fall until June 2010 when the oil leak was finally contained. The disaster devastated wildlife and coastline for miles around.

The total pre-tax cost to BP now comes in at £34.5bn.

Some critics have said BP should have let the case drag on for years rather than settle now but Dudley defended the settlement and said: ‘It is hard to manage and plan with that millstone around our necks.’

He said the deal allows BP to begin to look again at investing in the US once more.

The settlement will also secure BP’s dividend payments which it was forced to cancel for three consecutive quarters after the spill.

Total returns for investors in BP’s shares are down 35 per cent since the 2010 disaster, which also takes into account the recent oil price slump. However, returns in rival Royal Dutch Shell in the same period were down 5 per cent in comparison.

Trevor Green at Aviva Investors expected BP’s shares to recover further on the news. He said: ‘The rating discount to Royal Dutch Shell should close now and the stock is now an investment option for US investors who have been reticent to invest in the company since the spill.’

Dudley dismissed market talk of a takeover of BP and said BP is ‘neither prey nor predator’.

A clause in the settlement with the US means that if BP were sold to another company the fine would be payable immediately – putting off any potential suitor.

BP shares closed up 4.4 per cent, or 18.25p, to 437.4p.

SOURCE

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