Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

BP slips after new US court ruling on Gulf disaster, as FTSE fades on eurozone woes

Ahead of Gulf spill court case, Federal judge says BP must indemnify rig owner Transocean for certain claims

BP is among the biggest fallers in a downbeat market after a new US court ruling concerning the Gulf of Mexico disaster.

A Federal judge said BP must indemnify US group Transocean – which owned the Deepwater Horizon rig which exploded and spilled oil into the Gulf – for some compensatory damage claims, even if Transocean was found to be grossly negligent. But at the same time he ruled BP, owner of the Macondo well, did not have to indemnify Transocean for punitive damages or civil penalties imposed by the US government.

Civil litigation in the case is due to start at the end of February, but analysts at Morgan Stanley recently floated the idea that BP could settle ahead of time, albeit at a cost of bn, more than double the bn provision BP has so far made.

Commenting on the new ruling, analyst Andrew Whittock at Liberum Capital said:

The decision left both sides claiming they had been vindicated. It appears that Transocean is financially responsible for any punitive damages, fines and penalties flowing from its own conduct. But this may not reduce any fines to be levied on BP. The legal update could be good news or bad news for BP and is likely to be typical of the newsflow as the Court hearing gets underway late in February. There has to be some downside risk to BP. Hold.

Overall shares have slipped lower as the Greek talks drag on, and fears about Portugal’s debt position grow. US GDP figures later should give an indication as to how badly the world’s biggest economy has been affected by the eurozone crisis. The FTSE 100 is currently 13.17 points lower at 5782.03, while French and German markets have both slipped lower.

Intercontinental Hotels is the biggest faller in the leading index, down 32p to £13.25 after UBS cut its rating from neutral to sell. Analyst Simon Whittington said:

We remain relatively cautious on European hotel stocks for 2012. We currently expect modest positive RevPar [revenue per average room] growth in 2012-13, but uncertainty remains and the slowing occupancy growth
has often historically led to stock underperformance.

We move Intercontinental to sell following its recent strong performance. The company is well placed geographically, reflected in our RevPar assumptions being ahead of peers’. Despite this, earnings per share are expected to grow at 3%-4% over 2012-13. We believe there is a strong possibility of a special dividend in 2012, but this is more than priced in, and the company will have to accelerate its capital investment to achieve its target 3%-5% room count growth, given the low supply growth.

Banks are also under pressure, which is not surprising given the nervousness around Europe, with Royal Bank of Scotland down 0.6p at 27.07p and Lloyds Banking Group 0.61p lower at 32.215p. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds