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Houston - BP will battle to hold down fines that could hit $18bn in a new phase of the Gulf of Mexico trial that will rule on how much oil it spilled in 2010 and judge its efforts to plug its well.
Starting on Monday in New Orleans, this second of three phases of a trial determining responsibilities for the worst marine pollution ever seen in the United States, could - in the worst outcome for the British firm - land BP with a bill five times greater than the $3.5bn it has set aside for fines.
Its annualised earnings, based on last quarter, are running at about $17bn.
A first phase, which wrapped up in April, looked at dividing blame among BP and its contractors, Transocean and Halliburton, for the 2010 Macondo disaster which left 11 men dead and huge stretches of sea and coast fouled with oil.
Expected to last a month, this second part of the process will be crucial for shareholders in estimating some of the extra cash BP could end up paying out beyond the $42.4bn it has so far made provision for in its accounts to cover the clean-up, compensation and fines.
US District Court Judge Carl Barbier, renowned for setting a fast pace, is expected to announce his findings and penalties after a third phase of the trial, likely next year.
Much depends on how the court rules on a dispute between BP and the U.S. government over how many million barrels of oil were actually spilled, and on just how culpable BP was in failing to stop it for 87 days.
BP shares have lost a third of their value since the disaster, as the company hived off $39 billion of assets that generated $5bn a year in cashflow - or about a fifth of its earning power - before 2010.
Once the world's second ranked oil company by asset value, it is now the fifth.
"Until the court case is over, the potential upside on asset value is a waste of time," said Malcolm Graham-Wood, an analyst at investment bank VSA Capital. "Other investments in the sector offer greater certainty of operating results, vastly better management - and a better ability to sleep at night."
Pollution fines
BP says 3.26 million barrels leaked from the well during the nearly three months it took to cap the blowout at the Deepwater Horizon rig; the U.S. government says it was 4.9 million. Both those totals include 810 000 barrels that were collected during clean-up and which Barbier has agreed to exclude.
This month, BP's lawyers questioned the government's figure. "United States experts employ unproven methods that require significant assumptions and extrapolations in lieu of...available data and other evidence," they said in a filing.
They have also sought to convince Barbier that if the company is to be found guilty, it should amount to only "negligence" and not "gross negligence" - a crucial distinction since the latter carries much higher maximum penalties.
Under the Clean Water Act, negligence can be punished with a maximum fine of $1 100 for each barrel of oil spilled; a gross negligence verdict carries a potential $4 300 per barrel fine.
If the court judged the spill to have been 4.09 million barrels - the government estimate less oil recovered - the price of negligence could reach $4.5bn. Gross negligence, in the costliest scenario, could run to $17.6bn.
Starting on Monday in New Orleans, this second of three phases of a trial determining responsibilities for the worst marine pollution ever seen in the United States, could - in the worst outcome for the British firm - land BP with a bill five times greater than the $3.5bn it has set aside for fines.
Its annualised earnings, based on last quarter, are running at about $17bn.
A first phase, which wrapped up in April, looked at dividing blame among BP and its contractors, Transocean and Halliburton, for the 2010 Macondo disaster which left 11 men dead and huge stretches of sea and coast fouled with oil.
Expected to last a month, this second part of the process will be crucial for shareholders in estimating some of the extra cash BP could end up paying out beyond the $42.4bn it has so far made provision for in its accounts to cover the clean-up, compensation and fines.
US District Court Judge Carl Barbier, renowned for setting a fast pace, is expected to announce his findings and penalties after a third phase of the trial, likely next year.
Much depends on how the court rules on a dispute between BP and the U.S. government over how many million barrels of oil were actually spilled, and on just how culpable BP was in failing to stop it for 87 days.
BP shares have lost a third of their value since the disaster, as the company hived off $39 billion of assets that generated $5bn a year in cashflow - or about a fifth of its earning power - before 2010.
Once the world's second ranked oil company by asset value, it is now the fifth.
"Until the court case is over, the potential upside on asset value is a waste of time," said Malcolm Graham-Wood, an analyst at investment bank VSA Capital. "Other investments in the sector offer greater certainty of operating results, vastly better management - and a better ability to sleep at night."
Pollution fines
BP says 3.26 million barrels leaked from the well during the nearly three months it took to cap the blowout at the Deepwater Horizon rig; the U.S. government says it was 4.9 million. Both those totals include 810 000 barrels that were collected during clean-up and which Barbier has agreed to exclude.
This month, BP's lawyers questioned the government's figure. "United States experts employ unproven methods that require significant assumptions and extrapolations in lieu of...available data and other evidence," they said in a filing.
They have also sought to convince Barbier that if the company is to be found guilty, it should amount to only "negligence" and not "gross negligence" - a crucial distinction since the latter carries much higher maximum penalties.
Under the Clean Water Act, negligence can be punished with a maximum fine of $1 100 for each barrel of oil spilled; a gross negligence verdict carries a potential $4 300 per barrel fine.
If the court judged the spill to have been 4.09 million barrels - the government estimate less oil recovered - the price of negligence could reach $4.5bn. Gross negligence, in the costliest scenario, could run to $17.6bn.
