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The consequence of the US courts stating that BP was guilty of ‘gross negligence’, is the possibility that its fine per barrel of oil spilt could quadruple. This means that the UK-based oil company could see a further $18 billion in US fines imposed on them.
This ruling will also have a galvanising effect on the litigious society in the five states affected by the Deepwater Horizon accident in the Gulf of Mexico. The judge overseeing this ruling also announced where he felt the split of responsibilities fell with the companies operating the rig. He deemed that 67% lay with BP, 30% with Transocean and only 3% with Halliburton.
When this was announced, BP fell by over 6% as traders factored in these three consequences. Firstly, that the direct fine from US regulators could increase by as much as $18 billion. Secondly, that this could encourage a fresh round of court cases from smaller claimants. Thirdly, the consideration that BP had previously felt the need to suspend its dividend payments to shareholders.
At the time of writing BP shares are offering a dividend yield of 5.21%, well above the FTSE 100 dividend yield of 4.57%. BP’s importance as an income stock is very important to institutions, even if it’s less than what it used to be some six years ago when BP and Shell accounted for 25% of the FTSE’s dividend yield.
Shares in BP over the last 18 months had been making steady progress, but these latest developments should cap that move for some time. It will be interesting to see if the combination of hitting support and being oversold are enough to halt any further falls, newsflow permitting.