Liabilities and litigation litter BP road to closure

Fri Nov 16, 2012 12:04pm EST

* Conviction provides ammunition for future cases
    * Shareholders anxious for closure

    By Andrew Callus
    LONDON, Nov 16 (Reuters) - BP stands convicted of the
biggest corporate crime in U.S. history, based on the scale of
its punishment.
    Moving on will not be easy.
    Having agreed to pay $4.5 billion and wear the label of
felon, the British oil company will face no further federal
criminal charges over the 2010 oil spill disaster.
    On the downside, lawyers now have extra ammunition for civil
processes that could cost a great deal more.
    And as a company convicted of criminal acts, BP could be
suspended or debarred from contracting with the federal
government in a country that represents about a quarter of its
business.
    BP's shareholders have watched the company shrink before
their eyes in the two and a half years since the Deepwater
Horizon rig exploded, killing 11 people and spewing crude into
the ocean for three months until the mile-deep Macondo well was
capped.
    These days, closure is what they crave. 
    "BP are inching ever closer to drawing a line under the
Macondo incident and I think that investors will be happy to
have some finality, even if it does mean a headline grabbing
fine," said one top 15 investor as details of the settlement
emerged on Thursday.
    Analysts on a conference call tried to coax some positive
statements from finance director Brian Gilvary and the company's
top lawyer Rupert Bondy about the mountain BP still has to
climb, but both men stuck to their cautious script and gave no
guarantees on what happens next. 
    Total balance sheet provisions for the spill rise to $42
billion from $38 billion as a result of Thursday's ruling.
 
    That's about a third of the equity value of the company
itself, and well over a year's worth of capital investment
spending.
    But based on a rough calculation of estimates from analysts
and some previously paid items, BP's total bill from the spill
could exceed $58 billion.
    BP has raised $35 billion through the sale of assets and has
paid out, or is preparing to pay out, roughly the same amount.
    
  
    But everybody expects BP to pay more yet. The question is
how much more.
    Clean Water Act legislation is one of the few quantifiable
areas. Based on an estimate of 4.9 million barrels spilled and a
maximum fine of $4,300 per barrel. BP could pay $21 billion if
it is found guilty of gross negligence at a trial that begins in
February.
    BP, arguing that it is "no more than negligent", has
earmarked only $3.5 billion and says it would appeal against
gross negligence. 
    Alabama Attorney General Luther Strange, who represents
other states hit by the spill, said on Thursday he would pursue
a finding of gross negligence.
    Analyst Richard Griffith of Oriel Oil & Gas said Thursday's
announcement was "a material step forward for BP in terms of
removing another uncertainty."
    "Nevertheless, the civil trial could still be long and
protracted with the risk of a gross negligence verdict that
would be appealed," he said.   
    Finance director Gilvary also conceded on Thursday that
should it be debarred from operating in the United States, BP
would have to kick off another major rethink of strategy.
    "BP has not been advised of the intention of any federal
agency to suspend or debar the company in connection with this
plea agreement," was all the reassurance the company could give.
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