Shares plunge after judge finds BP 'grossly negligent'
BP has received the blow it has feared for more than four years after a US court ruled that it was guilty of "gross negligence" over the Gulf of Mexico oil spill - a decision that could add as much as $16 billion to its costs for the disaster.
The ruling hit BP hard, sending its shares spiralling down 6 per cent and wiping $9.6 billion off its market value.
"BP's conduct was reckless," Judge Carl Barbier said as he handed out his decision in New Orleans yesterday - a statement that is expected to lead to such a big hike in the fines it must pay that investors sent the company's shares down 28.75p to 455.0p.
The company immediately responded by saying it would take its case to the United States Court of Appeals.
"BP believes that the finding that it was grossly negligent with respect to the accident, and that its activities at the Macondo well amounted to wilful misconduct, is not supported by the evidence at trial," a BP spokesman said.
"The law is clear that proving gross negligence is a very high bar that was not met in this case. BP believes that an impartial view of the record does not support the erroneous conclusion reached by the district court," he added.
Manoj Ladwa, head of trading at the broker TJM Partners, said:
Obviously the market's not taken it well and it was a little bit unexpected, but you would expect BP to appeal the level of fines, the decision made.
Mr Ladwa added that while the decision was clearly a blow to BP, he expected the company to be able to absorb the additional cost.
"It is a short-term concern; longer term, BP are cash generative and I'm sure they'll have the funds to pay for this," he said.
The explosion at the Macondo well in April 2010 killed 11 people and spewed several million barrels of oil into the sea over the following three months.
BP has set aside $3.73 billion for penalties relating to the Clean Water Act, arguing that its conduct was "negligent" rather than "grossly negligent" - a category that carries a much larger fine.
The ruling means that BP could be liable for up to $19.2 billion of fines under the Clean Water Act, depending on how much oil is deemed to have been spilled and the degree of gross negligence. The worst case of gross negligence carries a penalty of $4,591 a barrel.
Meanwhile the US Government claims 4.2 million barrels leaked into the sea, but the precise figure has yet to be finalised. Simple negligence carries a maximum penalty of $1,174 a barrel.
The hike in BP's fine would push its total bill for the disaster well above the $45.9 billion that it has currently accounted for to cover costs such as legal fees, compensation and clean-up expenses.
The court found that BP's partners in the Macondo well project - Transocean and Halliburton - were 'negligent' rather than 'grossly negligent', meaning they face much smaller penalties.
The judge apportioned 67 per cent of the blame for the incident to BP, 30 per cent to Transocean - the operator of the Deepwater Horizon oil rig - and 3 per cent to Halliburton, the cement contractor.