BP has rattled investors by increasing its provision for compensation claims arising from the Deepwater oil spill of 2010. The amount set aside for payouts to private-sector plaintiffs was increased from $7.8bn to $9.6bn in the second quarter. The ultimate cost of the settlement would be "significantly higher", warned the oil giant, because many claims have yet to be received and processed. Claims can be made until next April.
BP continues to fight the claims administrator's interpretation of the compensation settlement in court, as it thinks it is too generous and has given rise to "fictitious" claims. The $20bn overall compensation fund is almost gone now, and future claims will hit profits. Meanwhile, the group's second-quarter profits of $2.7bn were 33% down on a year ago, due to a fall in oil prices and a low rouble, which dented its Russian earnings.
What the commentators said
Has BP been stitched up? The contrast between "the dragnet that has caught BP" and the light treatment of America's Halliburton, which also worked on the well, is stark, said Alex Brummer in the Daily Mail. Halliburton "failed to pour the right concrete at the well", covered up its errors and lost the paperwork. Yet its fine of $200,000 is worth "about ten minutes of claims against BP".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But BP must at least share the blame, as The Daily Telegraph pointed out. In a "highly politicised situation" there was always a risk of falling victim to spurious claims. Yet BP seems to have been careless in its approach to drawing up the settlement. "Failures to define key terms, such as revenues and the lack of a financial cap on the deal, raise questions about attention to detail".
This mess is all the more depressing, said Brummer, because Deepwater aside, the "simpler, slimmer BP" that has emerged is looking promising. The tie-up with Rosneft is solid and the group "appears to have lost none of its traditional skill in finding reserves" witness a big discovery in India and 11 new exploration projects. If it weren't for the Louisiana drama, BP could almost be considered "a growth stock".
-
Lloyds, Halifax and Bank of Scotland to shut another 45 branchesLloyds Banking Group, which includes Halifax and Bank of Scotland, is set to close a further 45 branches in 2024 - find out if a branch near you is closing.
-
US stock trading app Robinhood launches in the UK
The low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
-
As oil prices surge, should you buy BP shares?
Analysis The imbalance between supply and demand has sent the oil price surging, bringing bumper profits to oil giant BP. Rupert Hargreaves looks at the numbers and asks if BP shares deserve a place in your portfolio.
-
Should you be worried about energy windfall tax proposals?
Analysis Calls have been growing for a windfall tax on UK oil and gas producers. It's a popular idea, but is it a good one? And what does it mean for investors in the UK's energy companies? Rupert Hargreaves explains.
-
BP’s profits surge, but the company’s growth is far from guaranteed
Analysis BP profits are at their highest in a decade, and it looks to be a business firing on all cylinders. But its future is far from certain, says Rupert Hargreaves.
-
BP: really going “beyond petroleum” won't be easy
News BP is recovering and plans to become carbon neutral by 2050. Meanwhile, activist investors are targeting ExxonMobil. Matthew Partridge reports
-
BP looks set to return more money to shareholders as it beats expectations
News Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfolio.
-
BP has slashed its dividend – and markets love it
Opinion BP has bowed to the inevitable and cut its dividend in half – and its share price promptly rose. John Stepek explains what it means for shareholders and for beleaguered income investors.
-
BP bows to reality as it writes down $17bn of assets
News The oil giant has ditched its conspicuously bullish outlook and written down the value of its assets. Will it cut its dividend too? Matthew Partridge reports
-
Watch out income investors – BP looks likely to cut its dividend in the near future
Opinion Oil major BP is writing billions off the value of its assets as it struggles to adapt to the changing world. Unlike Shell, however, BP hasn’t yet cut its dividend. But, says John Stepek, it’s only a matter of time till it does.
