Will record fine mark a turning point for BP shares? – 14537

16th November 2012

BP this week received the largest fine in US government history of around $4.5billion (£3.2 billion) for the Mexican Gulf oil spill as the Huffington Post reports.

The firm has faced a turbulent couple of years since the Deepwater Horizon oil spill with the subsequent events related at length in the New York Times. The fine must be paid over the next five years.

Yet it is dwarfed by the £23.8bn which the firm has already agreed in compensation. In addition, it still faces many civil actions and it could yet be found to have breached clean water regulations which may mean more and even heavier fines.

Yet does accepting the fine signal the beginning of the end of this painful episode for the firm and can it really rebuild its reputation and its share price?

The Wall Street Journal points to many analysts' upbeat reaction to the fine. It also says that BP's US ambitions are back on track with chief executive Bob Dudley using a speech at Harvard University this week to underline the significance of America to the company.

The Economist's business blog Schumpeter notes that BP has not been accused of gross negligence which would have paved the way to Clean Water Act fines. It also notes that "investors took the news in their stride. Its share price barely budged even though BP lifted its estimate of the probable final cost to some $41 billion".

The Wall Street cheat sheet talks of BP as the undisputed king of the lawsuit mountain but then suggests that shareholders who have roughed out the bad times may now be rewarded with gains.

Motley Fool blogger Federico Zaldua, who is also a US portfolio manager, was rating the stock a buy before this week's news, pointing out that it was trading at a 17 per cent discount to its US peers and a 6 per cent discount to European ones.

Other links:

The WSJ's lawblog may be worth a read too as it goes into the legal detail of those fines.

The Christian Science Monitor reports that many environmental campaigners and local politicians in the affected States believe the fine is little more than a slap on the wrist.   

Meanwhile CTV news reports that the two employees facing manslaughter charges will argue that they have been made scapegoats by the US authorities.

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