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David Krapf, Editor-in-Chief It’s not over yet for BP


February 5, 2013

BP reported fourth-quarter earnings this morning and it wasn’t pretty. The company’s woes from 2010’s Deepwater Horizon spill continue to hamper its results. Net income was down almost 20 percent last year, mostly a result of the continued decline in the company’s oil and gas production and $4.13 billion in settlements related to the Macondo disaster ($3.85 billion of which were related to federal criminal charges settled in November.)

Analysts’ reactions to the results were lukewarm, as BP continues to try and rebound from the Macondo disaster in the U.S. Gulf almost three years ago. The next big hurdle for BP is the start of the civil trial on Feb. 25.

BP and the Justice Department may settle before the trial, which would likely benefit BP and its stock price. Analysts and others hate uncertainty. In the civil proceeding, BP faces potential fines of $5 billion to $21 billion under the Clean Water Act.

University of Michigan law professor David Uhlmann, former chief of the Justice Department’s environmental crimes section, told the Associated Press that a civil settlement with the Justice Department could cost BP more than double the $4 billion criminal settlement. The total cumulative net charge for the Macondo incident to date is $42.2 billion. 

“There is tremendous incentive for both sides to settle,” Uhlmann told the AP. If the government can prove gross negligence at the trial, the fines could approach the high end of the civil fines range.

BP Chief Executive Bob Dudley told analysts, “We remain prepared to settle the remaining civil claims, but only on reasonable terms. Throughout, we have been preparing for the trial scheduled for later this month, and we will be ready to thoroughly and factually present our case in court.”

Any settlement could also limit London-based BP’s operations in the U.S. Gulf.

BP began deepwater Gulf of Mexico operations in the mid-‘80s and was the largest producer in the Gulf in 2012. BP operates seven facilities in the Gulf (Marlin, Horn Mountain, Na Kika, Holstein, Mad Dog, Atlantis and Thunder Horse) and has equity interest in five partner-operated facilities (Diana Hoover, Mars, Ursa, Ram Powell and Great White).

This should be another interesting month for BP and the Gulf deepwater market.

 

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