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After Earnings, Is BP plc (ADR) (BP) Finally on its Way Back to Health?

BP plc (ADR) (NYSE:BP)The trial of BP plc (ADR) (NYSE:BP) and Transocean LTD (NYSE:RIG), the operator and owner of the rig that tragically exploded in the Gulf of Mexico in 2010, continues its proceedings. Three years after the explosion, both stocks still suffer the stigma of the oil spill, and both companies are likely to face further financial penalties.

With BP plc (ADR) (NYSE:BP)’s recent earnings in the rearview mirror, investors are looking for any reason for enthusiasm they can find. Is BP finally out of the woods? Or is there further pain in store for investors?

Measured progress, but a long road remains

BP’s second quarter report showed signs of progress, but this is a company that continues to be under pressure from the effects of the 2010 spill.

Revenue clocked in at nearly $95 billion, and operating cash flow in the quarter was $5.4 billion, up $1 billion from the same quarter last year.

Of course, the major factor keeping a lid on BP plc (ADR) (NYSE:BP)’s growth remains the massive fees paid in relation to the Gulf spill. BP has shelled out a grand total of $42.4 billion in cumulative net charges relating to the incident.

As of the end of the most recent quarter, BP plc (ADR) (NYSE:BP) had paid $19.7 billion of the $20 billion trust fund the company established, leaving only $300 million for further expenditures. Should the company have to spend in excess of $20 billion, then those additional costs will be charged to the income statement in future quarters.

Transocean LTD (NYSE:RIG) is actually in a strong position, and is likely to emerge from the spill trial relatively unscathed. Even if Transocean is fined, the company has the financial flexibility to withstand even a severe hit from the trial: cash flow from operations totaled more than $2.7 billion in 2012, representing a 48% increase over the prior year. The company reported solid full-year results of $3.96 of adjusted earnings per share on the back of 15% growth in operating revenue.

Moreover, Transocean LTD (NYSE:RIG) recently instituted a dividend program. Shareholders recently received the first installment of the company’s $2.24 annual per-share distribution. This is no token dividend: investors will receive a 4.75% yield based on where the stock currently trades.

Is there any reason for hope for BP?

With numbers like $42 billion (and counting) in charges relating to the 2010 Gulf spill, most investors probably have a hard time coming up with any reason to stick with BP plc (ADR) (NYSE:BP). After all, there are many highly profitable oil majors out there to choose from that don’t have nearly the same headwinds as BP plc (ADR) (NYSE:BP).