BP's had enough, and wants Cameron to help

The myriad costs relating to the Gulf of Mexico oil spill are now piling so high that the firm plans to ask the prime minister to have a word with the US government at the G8.

by Michael Northcott
Last Updated: 03 Oct 2013

The Deepwater Horizon leak still hasn’t been plugged, if you include BP’s bank account. Just as it finishes paying off tens of billions in federal lawsuits, it now has to contend with the unlimited liability for civil cases and class actions from the towns and people affected by the spill. That’s why executives are on the verge of asking David Cameron to talk to the US government in an attempt to mitigate the spiralling costs. Whether or not it will do anything is debatable, since Obama has repeatedly made it clear that he doesn’t really like Britain, its PM or its companies.

But bosses must feel it’s worth a shot: they fear that the amount of money BP is haemorrhaging on fines and lawsuits will cause it to become a takeover target. It’s perfectly possible that Cameron will try to squeeze some political capital from ‘protecting Britain’s interests’ by raising the issue. Not to mention, we all know how upset everyone was the last time a major British plc got shafted (Cadbury, anyone?), so the PM may feel this is an opportunity to bolster his ‘pro-business’ credentials.  

Another concern of the firm is that companies unaffected by the oil spill may have been receiving large cash windfalls as part of court-ordered compensation deals. In March this year, BP asked a US judge to suspend a £5.6bn settlement with local businesses. It said: ‘While the ultimate amount at stake is at present inestimable, awards for fictitious losses already are hundreds of millions of dollars and could reach billions.’ It claims that, in one case, a firm 200 miles inland, which conducted no business in the affected area, received $21m in ‘compensation’.

Given the cash ‘leakage’ though, BP is doing better than you’d think. Profits fell yet again in the first quarter of 2013, down 9% to $4.2bn, but this is vastly higher than City analysts were expecting. Most were predicting profits almost a billion dollars lower at $3.27bn. The strength of its balance sheet has also been helped by the sale of its stake in Russian joint venture TNK-BP, which means it is now able to return around $8bn to shareholders as part of an extensive share buyback programme and pay off a chunk of debt.

As far as bending Obama’s ear on the issue is concerned, however, we think it’s pretty optimistic to think that Cameron has enough clout to change anything. It looks like ‘British Petroleum’ (that’s what Obama kept on pointedly referring to it as during the scandal) is by no means out of the woods.

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