BP could face up to $18bn in extra fines after US ruling on Gulf of Mexico spill

Oil firm reckless and negligent over Deepwater Horizon disaster, says judge in decision wiping £5bn off stock market value

Terry Macalister
The Guardian, Thursday 4 September 2014 14.01 EDT

BP has already paid out or set aside in penalties or compensation more than $43bn as a result of the Gulf of Mexico accident in which 11 workers died. Photograph: KPA/Zuma/Rex Features

BP could face up to $18bn (£11bn) in further fines after being found guilty of gross negligence for the Deepwater Horizon blowout that killed 11 workers and led to millions of barrels of oil spewing into the Gulf of Mexico.

The oil firm had repeatedly expressed confidence it could avoid such a damning verdict over America's biggest offshore oil accident but a US district judge, Carl Barbier, ruled on Thursday that BP had been reckless as well as negligent.

The long-awaited decision from the New Orleans court hit the firm's share price – which fell by 5%, wiping more than £5bn off its stock market value – despite BP promising to launch an appeal.

The firm has already paid out or set aside in penalties or compensation more than $43bn as a result of the accident and has periodically been tipped as a takeover target in its weakened state.

The judge apportioned 67% of the blame for the disaster to BP, 30% with its US rig operator, Transocean, and 3% for Texan-based well expert Halliburton.

"BP was reckless," wrote Barbier in a 153-page judgment. But he will not rule until next year on how much oil was spilled, an important factor in deciding the full extent of BP's financial liability. Under the US Clean Water Act the additional penalties could reach $18bn.

The judge said BP could also be liable for punitive damages from other claims, opening up the possibility that others whose interests had been damaged by the spill could yet sue.

The company had earlier settled a criminal case with a $4bn fine after pleading guilty to 14 federal charges, including manslaughter for the 11 deaths plus obstructing Congress as it investigated the size of the spill. There was a further $9.2bn settlement with civil claimants in 2012 but the latest ruling from New Orleans is the outcome the company most feared.

The UK oil group had only ever set aside $3.5bn specifically for this and said on Thursday it "strongly disagrees" with Barbier's decision.

"BP believes that the finding that it was grossly negligent with respect to the accident and that its activities at the Macondo well amounted to wilful misconduct is not supported by the evidence at trial. The law is clear that proving gross negligence is a very high bar that was not met in this case. BP believes that an impartial view of the record does not support the erroneous conclusion reached by the district court."

The accident in April 2010 led to the departure later that year of the then-chief executive, Tony Hayward, and his replacement by Bob Dudley.

BP's share price has never recovered from the tragedy and the firm – the largest operator in the US Gulf – at one stage was temporarily barred from receiving US government contracts. The spill damaged the livelihoods of shrimp fishermen and other groups as the tar-like materials swept on to the southern US beaches, but there have been arguments about exactly how much oil was spilled.

The statutory maximum penalty under the Clean Water Act is $1,100 a barrel where the court finds simple negligence and $4,300 a barrel for gross negligence or wilful misconduct.

"During the penalty proceedings, BP will seek to show that its conduct merits a penalty that is less than the applicable maximum after application of the statutory factors," the company said.

Despite the share fall, the heaviest since June 2010, Jason Gammel, an equity analyst at investment house Jefferies, still rates the stock a "buy" and said in a note there should be no need for BP to ditch planned payouts to investors.

He said: "We believe that BP has sufficient liquidity to meet its obligations. We further expect that a worst case scenario of fine level would not be paid in the near term; we would expect a lengthy appeals process first. We thus do not believe there is risk to the current BP dividend."

BP has been through a series of controversial incidents in the US including the Texas City refinery fire, spills in Alaska as well as a propylene trading scandal. But in recent months it has faced further potential reputational and financial damage following its decision last year to take a 20% stake in the Kremlin-controlled Russian oil company Rosneft.

The chairman of Rosneft, Igor Sechin, has been hit with travel restrictions under western sanctions over Russia's involvement in the conflict in eastern Ukraine.

But BP's trading operations have been going though a better period with second quarter replacement cost profits, which strip out volatility in oil prices, up 33% to $3.2bn from the same period last year.