BP Puts Deepwater Horizon Accident Behind it

While BP remains on the hook for $23 billion liabilitie for the oil spill, the recognition of a reliable estimate removes a key element of uncertainty for the company

Allen Good 25 November, 2016 | 1:52PM

The settlement reached with the U.S. federal government and Gulf states earlier this year was a major step for BP (BP.) in putting the 2010 Deepwater Horizon accident behind it. While BP remains on the hook for $23 billion, to be paid over the next 17 years, the recognition of a reliable estimate for all remaining liabilities removes a key element of uncertainty for the company.

With outlays of about $2.5 billion due through 2018 and $1.1 billion per year thereafter, BP should be able to meet its liabilities with proceeds from targeted asset sales of $2 billion-$3 billion per year, which we view as a rather low hurdle.

With that issue largely resolved, BP is now turning its focus to positioning the company to compete in a world of lower oil prices. Its first step is to improve its cost structure and reduce its capital outlays so that it can cover its dividend at $55 per barrel oil by 2017. While we estimate that this goal is slightly ambitious, it is likely achievable by 2018, making it one of the safest dividends among the European integrated oil firms.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BP PLC305.75 GBX-2.61

About Author

Allen Good  Allen Good is a senior stock analyst covering the oil and gas industries.

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