BP plc (ADR) (BP) “Gross Negligence” Ruling Not Without Small Glimmers of Hope

BP plc (ADR) (NYSE:BP) suffered a major blow yesterday in a New Orleans court when it was ruled that they were “grossly negligent” in their conduct during the 2010 Gulf Oil Spill. The ruling made them liable for nearly four times the amount of damages as could have been heaped upon them under the US Clean Water Act had they simply been found negligent. Yet as CNBC’s Catherine Boyle reported this last night, there are some potential silver linings in the situation.

USEPA photo by Eric Vance

“Having said that, there’s a few potential lights within this. For example, we haven’t actually set the level  of the fine yet, while a lot of people are talking about the $17.6 billion figure, that’s the absolute maximum based on the Clean Water Act and that wouldn’t actually be fixed until January. Of course BP itself has said it is really, really strongly contesting this. The appeal process is a very long one in the US, so this could actually be something we won’t see the back of for another couple of years,” Boyle said.

Boyle added that BP plc (ADR) (NYSE:BP) is also in a good position of liquidity that it should be able to pay dividends, and investment house Jefferies agrees, maintaining a “buy” rating on the stock in a note to investors yesterday. They stated that in addition to the fine being spread out over a number of years, that it may not even take effect for some years yet while BP plc (ADR) (NYSE:BP) contests it. The potential $17.6 billion fine would be in addition to estimated compensation payments, either already made or set aside, of some $43 billion.

Unsurprisingly, BP plc (ADR) (NYSE:BP) shares plunged yesterday on news of the ruling, falling to just $44.89, a fall of more than 5%, which wiped out more than $5 billion in value. The stock has rebounded slightly in morning trading today however, up more than 1.5%, perhaps on some of those same silver linings detailed by Boyle.

Disclosure: none