BP shares gain after release of internal report on Gulf blowout

BP shares gain after Gulf report

LONDON — Shares in BP PLC tracked slightly higher after the release of an internal report on the disastrous oil spill in the Gulf of Mexico that deflects much of the blame onto rig owner Transocean Ltd. and contractor Halliburton Co.

The stock bounced as high as 416.4 pence ($6.44) after the report was made public on Wednesday, before retreating a little to trade up 1.7 percent at 413.9 pence in afternoon trade on the London Stock Exchange.

The internal report is far from the final word on the disaster, but if BP is successful in sharing the blame with Transocean and Halliburton it will avoid being charged with gross criminal negligence — and being burdened with the resulting heavy financial penalties alone.

BP did some of the blame for the blowout on the Deepwater Horizon rig that killed 11 workers and started the worst oil spill in U.S. history, acknowledging that its own employees misinterpreted a safety test that should have raised a red flag.

But — as widely expected — it also pointed the finger at other companies, including Transocean, saying the company’s rig crew failed to recognise and act on danger signals that led to the bubble of methane gas that caused the explosion. U.S. company Halliburton was criticized for errors in its cementing of the busted Macondo well.

“It is evident that a series of complex events, rather than a single mistake or failure, led to the tragedy,” said outgoing Chief Executive Tony Hayward. “Multiple parties, including BP, Halliburton and Transocean, were involved.”

Transocean criticized the report as “self-serving” and an attempt to conceal flaws in BP’s well design and a number of mistakes in key decisions.

“In both its design and construction, BP made a series of cost-saving decisions that increased risk - in some cases, severely,” the company said in a statement.

The report was of little surprise to analysts — accepting full responsibility for the disaster could have led to the London-based company being found guilty of gross negligence and fined up to $20 billion.

Holly Pattenden, the head of oil and gas analysis at Business Monitor International, said BP was well placed to deal with the other financial costs, including the hundreds of lawsuits already filed over the spill.

“It will all depend on whether BP is found to be criminally negligent of its operation of the well,” said Pattenden. “The report today suggests that they weren’t and the problem can be shared across the different companies that were involved.”

BP has set aside $32.2 billion to cover the long-term costs of the spill and is targeting $30 billion in asset sales over the next 18 months to shore up funds — it has already confirmed about $10 billion of those.

A decision by London-based Fitch Ratings agency ahead of the release of the report to upgrade BP to an ‘A’ rating from ‘BBB’ added to the positive sentiment.

Fitch said its upgrade reflected an end to the threat of further leaks from the Macondo well, the improved visibility of potential liability scenarios the company could still face and substantial progress made in raising cash to meet those potential costs.

BP has increased its committed standby credit lines to around $17 billion from $5 billion and has announced $10 billion of a planned $30 billion in asset sales over the next 18 months.

“Fitch notes that BP’s liquidity trebled since June following dramatic short-term progress on asset disposals,” the ratings agency said, adding its outlook for the company was “stable.”

“BP’s credit metrics remain robust, and the company does not necessarily need additional borrowings to meet anticipated liabilities given cash inflow provided from asset sales and organic cash flow generation in the current oil price environment,” it added.

AP reporter Chris Kahn in New York contributed to this report.