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P’s Shares Up as Report Spreads Spill’s Blame

07 January 2011 02:51 (UTC +04:00)

Baku-APA. Shares in BP PLC rose Thursday, as investors concluded that the report of a U.S. presidential commission into last year’s Gulf oil spill reduced the likelihood that the company would be found guilty of gross negligence, APA reports quoting The Wall Street Journal.
BP’s London-listed shares were up about 2% in London midday after the release of a 48-page chapter from the report by the spill commission, which distributed blame for the spill between BP and its contractors Transocean Ltd. and Halliburton Corp.
The report said the blowout that triggered the worst offshore-oil spill in U.S. history resulted from management failures by BP and its contractors as well as "failures of government to provide effective regulatory oversight of offshore drilling." It said the root causes of the disaster were "systemic," and without significant reform of industry practices and government policies "might well recur."
While uncomfortable reading for BP, the excerpt of the report appears to jibe with the company’s argument that the Gulf disaster was the result of multiple causes and involved multiple companies. Its conclusions also conflict with claims made by the oil industry last summer that the blowout was a one-time event caused by unusual and risky decisions by BP.
Analysts said that, with BP no longer seen as solely responsible for the disaster, it now has a better chance of clawing back some of the costs of the spill from its license partners in the blown-out wellâ€”Anadarko Corp and Japan’s MOEXâ€”as well as the contractors. "This spreads the risk, the burden and the cost," said Jason Kenney, an analyst at ING Bank.
BP’s stock has long been weighed down over uncertainty regarding the ultimate cost of the spill. That has been compounded by the question of whether it would be found guilty of gross negligence, which would vastly increase the size of the fines it could face for polluting the Gulf. But those fears now appear to be ebbing.
"With BP’s share price up 10% this year, the market is clearly taking the view that the chance of gross negligence being proved is very low," said Ivor Pether, a fund manager at Royal London Asset Management and a BP shareholder.
He also pointed to recent comments by Kenneth Feinberg, the lawyer administering BP’s $20 billion claims fund, who said last week that just $10 billion may be enough to compensate economic victims of the spill. "That was encouraging in terms of the total extent of economic damage the spill has inflicted on BP," Mr. Pether said.
However, while the excerpt of the report published Thursday criticized all three companies, it focuses most heavily on BP. The commission identified nine decisions that increased risk while potentially saving time, and said BP was responsible for at least seven of them.
But the panel also slammed Halliburton for what it says was the company’s failure to properly test the cement used in the well. And it criticized Transocean, which owned and operated the rig, for failing to communicate to its crew lessons from an earlier near-miss in the North Sea which was "eerily similar" to the Gulf blowout.
Though the report may have eased some of the pressure on BP, analysts stressed that the company is not out of the woods. "The U.S. government will still have its pound of flesh and will likely impose record fines on BP" for the pollution of the Gulf, said ING’s Jason Kenney.