AFP - BP shares rallied in trading here on Monday as investors welcomed news that the British oil giant has agreed to a vast $7.8 billion settlement for victims of the 2010 Gulf of Mexico oil spill. The company’s share price advanced 1.55 percent to 504.18 pence in midday trade, having earlier jumped as high as 512 pence. London’s FTSE 100 index of leading shares meanwhile retreated 0.52 percent to 5,880.34 points.
"BP’s share price has come off the trade high of 512 pence and has steadied around the 504-pence mark," said broker Owen Ireland at Valbury Capital. "This might indicate that investors are only moderately pleased by the settlement, and that perhaps there are other issues which BP may have to deal with in the future."
BP announced over the weekend that it had reached a deal to settle thousands of claims from fishermen and others affected by the 2010 catastrophe in the Gulf of Mexico, ahead of a major US trial. The estimated $7.8-billion settlement does not affect what is anticipated to be tens of billions of dollars in fines and claims from the US government, coastal states, and local governments impacted by the spill. Nor does it resolve suits filed by shareholders or others seeking compensation because of a drilling moratorium imposed after the worst environmental disaster in US history.
The last-minute deal means the highly anticipated trial will be delayed once again after a week-long postponement was ordered last Sunday to allow the settlement talks to continue. The case will likely still go to court even if a deal is reached with the federal government.
"The announcement that BP has reached settlement with the more than a hundred thousand litigants... is an impressive achievement," said Barclays in a research note to clients. "The company still faces charges from others – most notably the Department of Justice (DoJ) and five Gulf States – before the full cost of Macondo can be quantified."
The British energy giant is hoping to shift some of the cost to its subcontractors, a complex legal question which will likely end up taking years and multiple appeals to resolve. The April 20, 2010 explosion on the BP-leased Deepwater Horizon drilling rig killed 11 workers, and in following days blackened beaches in five US states and devastated the Gulf Coast’s tourism and fishing industries.
The $7.8 billion settlement will be paid from the 20-billion-dollar trust fund that BP set up to compensate people affected by the disaster.