Oil giant BP’s appeal against a potential £11billion fine over the Gulf of Mexico disaster could stretch on for years, a note to investors has claimed.
BP said it would fight the ruling by a judge who found that the oil giant was “grossly negligent” in the run-up to the fatal accident which killed 11 workers.
Analysts for broker Investec said BP bosses were “digging in for the legal long haul” after BP’s chief financial officer Dr Brian Gilvary said BP was “not minded” to settle with the court.
Mr Gilvary also indicated that the company’s financial targets to 2018 were unchanged and there was no need to accelerate assets sales to pay the penalties.
According to Investec, BP believes that any fine would be “significantly lower” than £11billion, a figure calculated on the £2,666 per barrel charge under the US Clean Water Act based on an estimated volume of 4.2billion barrels which escaped out of the damaged well 5,100 feet below the surface of the Gulf.
Following the ruling of the Fifth circuit court last week, BP said it would launch an appeal. If this is rejected, BP has the option of taking it to a case heard by a wider appeals court. Failing that, BP could then take its fight to the US Supreme Court, Investec explained.
In the note, Investec said: “When it does come, BP acknowledges that any fine could end up being paid in multi-year installments. It is conscious that a settlement would give it and investors ‘closure’ but, given its ongoing experiences with the class action settlement in 2012, it’s board is “not minded to do so”.
“The legal route seems its preferred option”, it said, adding: “the whole process could last months, if not years.”
Last week Louisiana district judge Carl Barbier said BP bore 67% of the blame for the Macondo incident in 2010 and that and that two other companies in the case, Transocean and Halliburton, were not as much to blame.
The fines are over an above the £2billion BP has set aside for fines under the Clean Water Act, part of a broader series of provisions for cleanup, compensation and damages which exceeds £25.7billion.
Investec has highlighted that BP’s cash reserves were £16.9billion at the end of June, with about £3.9billion left in its oil spill trust fund.
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