Yes, says Fred Lucas of JPMorgan, who notes that BP is trading on an implied reserve multiple that’s 30 per cent below its peers and equal to ExxonMobil’s long run finding and development costs:
Who also says investors should not overreact to news that BP could face penalties of $21bn-plus if found libale for damages over the Macondo oil spill.
Yesterday’s news that the US Department of Justice filed a civil suit against BP and others is not a surprise – in our view, it is part of the expected civil and criminal legal process that we believe concludes with multiple settlements in 2011. The filing has some notable aspects:
Responsible parties – The DoJ has filed against nine defendants that include the lease partners (BP 65%, Anadarko 25% and Mitsubishi 10%), and the rig owner, Transocean. The complaint actually names the defendants and says that they are jointly and severally liable under the Oil Pollution Act. The Attorney General also commented that ‘it is conceivable that as time passes and as evidence is developed, that additional entities will be added’.
No liability figures cited – Contrary to today’s press headlines, the filing does not ask for specific damages. Under OPA, there is a statutory limitation to damages of $75m that is removed if gross negligence is proven. We note that BP has waived this cap. The Clean Water Act fine ranges from $1,100 to $4,300 per barrel.
It was the cement’s fault – FT Alphaville