LONDON, Sept 5 BP should be able to meet
the cost of up to $18 billion of new fines for the 2010 Gulf of
Mexico oil spill without major asset sales or a big cut in its
dividend, analysts say.
The oil group's shares dropped nearly 6 percent on Thursday
after U.S. District Judge Carl Barbier in New Orleans,
Louisiana, said it was "grossly negligent" in the April 20,
2010, rig explosion and spill that killed 11 workers.
However, BP said it would appeal the ruling, meaning any
decision on indemnities could be years away.
"The headline is obviously negative, but BP will appeal and
the appeals process is likely to be dragged out for years," said
Bernard Hodee, analyst at Raymond James, which kept its rating
on BP shares unchanged at "fair value".
BP has set aside only $3.5 billion for fines under the Clean
Water Act, part of a much broader series of provisions for
cleanup, compensation and damages that exceed $42 billion.
But it could be liable for up to $17.6 billion if its appeal
against the "gross negligence" ruling is denied.
"It's a big hit financially, but not a strategy-altering
blow. It would have obviously preferred alternative uses for the
funds and it is negative but I don't think it changes BP's
course. The hard lifting was done in 2010-12," said Jefferies
analyst Jason Gammel, referring to asset sales in those years.
The unwelcome news, at a time when many oil firms are
struggling to cut costs in the face of shrinking profits, is
unlikely to have much impact BP's dividend payments in the
near-term, as the company had $27.5 billion in cash and
equivalents on its balance sheet at the end of the second
"Although this is now a point of high uncertainty for
investors, we believe the financial implications of this ruling
will remain significantly below the maximum - the Citi estimate
is $8.2 billion - a sum that should not impact on BP's ability
to fund future growth ambitions nor shareholder dividends," Citi
said in a note, signalling they expect the eventual level of
fines will be well short of the $18 billion maximum.
It upgraded its BP share valuation to "buy" from "neutral",
raising its price target to 510 pence from 480 pence.
The case will go on for months or even years with Barbier
set to assign damages after the next phase of a civil trial over
the accident, scheduled for January 2015. The two earlier phases
of the trial looked at how to apportion blame and examined how
much oil spilled.
BP shares were flat at 455 pence by 0740 GMT on Friday.
(Reporting by Ron Bousso and Dima Zhdannikov; Editing by Mark