Oh, the roller coaster that is BP’s (BP) legal woes. It actually has been quite fun to watch as an outsider, but if you’re a BP stock holder — especially if you bought before the Deep Horizon disaster — I would imagine this has been a pretty rough ride. Lawsuit after lawsuit, asset sale after asset sale, has mired much of the long-term thesis of BP.
And the hits keep on coming.
After receiving some good news, BP stock is once again facing some issues related to the worst oil spill in history, which killed 11 workers and released approximately 5 million barrels of crude into the sea. Investors looking at the European integrated giant today still must weigh all of these legal troubles when contemplating buying the stock.
If anything can be seen as win in the whole BP stock situation, it’s the recent ruling regarding payments to spill victims.
Last week, BP won an injunction against a previous ruling on how the settlement with claimants was interpreted. BP had argued that the “Settle Czar” was essentially handing out payments willy-nilly to victims and had been approving fabricated payments for business economic losses. Based on the agreement that BP reached with victims last year, several of these payments shouldn’t have counted.
According to the 67-page ruling, the injunction will allow for the stoppage of payments for up to a year as the courts will re-decide who actually deserved payment versus fraudulent claims. BP had argued from the beginning that complex accounting issues that underlined some settlement claims caused them to either be fraudulent or rushed through the process. Overall, the court’s ruling could help BP save millions of dollars and analysts estimate that approval rates for future settlement payouts would cut by a quarter.
This is the first piece of positive news that BP has seen from this whole disaster since 2010. Needless to say, the integrated oil giant scored a major win with the injunction and shares rose more than 2% on the news.
The Bad … And It’s Still Bad
While the injunction is a nice boost for BP stock (and the company’s ego), it’s only temporary. The courts still are hammering out the big issues — the kind of issues that could see BP pay out more than $18 billion in fines.
Last Monday, the civil trial against BP began its second phase. These piece of the trial will be used to determine just how much oil BP spilled into the Gulf of Mexico. Prosecutors for the government will argue that across 87 days — before the well was capped — a total 4.9 million barrels of oil was discharged into the sea. That’s roughly the equivalent of one-quarter of all the oil consumed in the United States in a day. BP has stated that only 3.26 million barrels was spilled.
That difference is a big deal.