BP’s $18.7 billion settlement over the 2010 Gulf of Mexico spill draws a line under years of uncertainty to allow the company to focus once again on growth—but it could also make it an acquisition target, Reuters reports in an analysis of this morning’s settlement announcement.
The British energy giant, whose shares are still some 35% below their value before the largest offshore spill in U.S. history, still faces headwinds from the sharp decline in oil prices and its large exposure to Russia.
The settlement lifts a huge weight off Bob Dudley, BP’s first U.S. chief executive who was appointed leader just six months after the oil spill. He was tasked with rebuilding a company responsible for one of the world’s worst oil spills after an explosion on the Deepwater Horizon rig killed 11 people died and has since faced an indefinable mountain of legal claims.
“For us this is closure for the major legal proceedings from the event,” Dudley told reporters today. “This makes it much clearer in terms of planning the future of the company and managing and phasing our investments.”
For BP, which made $3.78 billion in profit last year, putting a figure on the spill bill will allow it to count its spare cash and start thinking about where to spend it.
“We’ll be able to spend more time on what we do well, which is finding, producing, developing, selling products in oil and gas,” Dudley said.
The news of the settlement was received with relief among investors as well, with BP shares soaring nearly 5% following the announcement.
BP had significantly narrowed its oil production business in the years following the Gulf spill to Russia, Azerbaijan and Iraq and, like its peers, slashed capital expenditure this year in the face of lower oil prices.
BP was forced to shed over $40 billion of assets to cover the spill’s cleanup and litigation costs, leading to speculation that it could be acquired by a larger peer. The near halving of oil prices since last July to around $60 a barrel and Royal Dutch Shell’s $70 billion bid to buy smaller rival BG Group had revived speculation about a possible acquisition of BP, and the settlement could offer the clarity needed for any deal.
“BP had always been slightly mentioned as takeover play since it’s been in this trouble, and I think companies have been slightly hesitant to make a bid while this has been hanging over it,” said Joe Rundle, head of trading at ETX Capital. The settlement “does clear the way for a potential bid,” he added.
Read the full analysis by Reuters. As reported this morning, Louisiana will receive a $6.8 billion share of the settlement—about 36% of the total—while Alabama will receive $2.3 billion, Florida $3.25 billion, Mississippi $2.2 billion and Texas $788 million. The Associated Press has a full breakdown of the settlement payment.
