BP Gets a Break on Some Gulf of Mexico Claims

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BP (NYSE:BP) saw some mixed progress in the Macondo spill incident as a federal judge in New Orleans threw out claims by Mexican states and inland cities in Alabama that they were physically harmed by the disaster. [1] The judge also dismissed claims under state laws made by six parishes that sought penalties against BP for the damage to wildlife because of the incident. The claimants can, however, seek other means to continue their cases in the trial that is set to begin in February next year. BP’s contractors Halliburton (NYSE:HAL) and Transocean (NYSE:RIG) will also be defendants in the case.

We have a $55 price estimate for BP which is at a 25% premium over its current market price.

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Claims Reduced

The latest ruling reduces the number of cases that will be brought up against BP in the final trial by a few hundred, according to some estimates. [1] Thousands of coastal property owners and many local governments have sued BP for the GoM spill which is regarded as the worst in the U.S. history. Judge Carl Barbier, who threw out the claims made by the inland cities in Alabama, however asked the cities to directly approach the company for damages. The ruling also asked the city governments to approach the court if the company declined to pay damages.

The Mexican states which were pursuing damages under the Oil Protection Act (OPA) under the Cartagena convention that allows foreign governments to recover damages saw their case dismissed as the judge ruled that the convention did not cover damages under the OPA. [1] These states can however still pursue some of the claims against BP.

Overall, BP is facing claims for physical damages related to the spill, costs resulting from oil clean up,a  decline in tax revenues and higher social security costs from the local governments. [1] Expenses relating to the spill have a direct bearing on BP’s stock price as indicated in the chart below.

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Notes:
  1. Mexican States, Alabama Cities Can’t Bring Some BP Claims, Bloomberg [] [] [] []