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UK oil giant, BP plc (LSE:BP.), is nearing its target to break out of the financial burden from the horrid Gulf of Mexico oil spill that has damaged not just the company’s image but its balance sheet, but the legal battle over BP’s accountability in the largest oil spill in history is still on and reaching for its third year in the hands of US courts.
In the third quarter results for 2012, the oil and gas firm said it is now just US$3 billion short of reaching the US$38 billion it targets to raise, most of which allotted for the costly litigation relating to, and clean up of, the oil spill.
BP is now U$35 billion less in asset value than it was in 2010 when the oil spill happened off the Gulf of Mexico that resulted in multi-billion dollar lawsuits and is nowhere near its conclusion.
Although the group’s Chief Executive, Robert Dudley, said the divestment programme is about “about fundamentally reshaping and repositioning our upstream portfolio”, BP has been pouring billions into the Gulf of Mexico Trust Fund, the last payment of US$860 million is to be made in the fourth quarter for a total of US$20 billion.
Beyond the fund, BP has paid a total of US$8.8 billion to government agencies, individuals and businesses for their claims and other costs.
Reshaped BP
Yet while the company has been giving up assets, which it may not have probably sold were it not for the disaster, BP is also accumulating upstream assets around the globe to fill in for the losses.
“BP expects to generate future growth through increased investment in new upstream projects in higher-margin areas and through new access and exploration,” it said, noting 15 new potential hydrocarbon plays currently on schedule to be tested.
A recent struggle in its Russian holdings, however, has resulted in BP giving up its interest in a joint venture but not without something in return. BP is to receive some US$12.3 billion in cash for its stake in the TNK-BP venture as well as 18.5% stake with the ex-partner’s parent company Rosneft for a total stake of 19.75%, giving the firm a larger access to one of Russia’s leading oil and gas companies.
“BP is becoming a tightly-focused oil and gas company,” said Dudley, who also looks forward to the company becoming more cash generative and value creator for its shareholders.
Valued BP
Speaking of value, BP’s report card for the period July to September received positive response on the London Stock Exchange as it added some 5.1% to its share price to £4.47 a share by 11:00 AM GMT.
That’s equivalent to 21.8 pence, 3.8 times the 9 US cents (5.6 pence) the shareholders are to receive for every share they have of BP. In total, BP’s underlying cost profit per ordinary share is at 27.16 US cents (16.90 pence), a figure a few pence shorter than during the same period last year, but significantly higher than the previous quarter.
BP has regained as much as a third of its market valuation during the height of the Deepwater Horizon catastrophe, and is now about 26% away from its market appreciation before the disaster happened.
