Investors see through BP penalties
The company's stock price rises after $4.5 billion in fines are announced. The news removes some uncertainties surrounding BP's future.
Investors love stability more than anything else, and the fine announcements Thursday help remove some of the uncertainties around the stock. But there's more to it than that. Investors are also looking at the dollar amounts here and figuring how they impact the company. The bottom line? These fines aren't nearly as damaging as they sound.
BP has five years in which to pay a $4 billion fine to settle all criminal claims related to the horrific disaster that cost 11 workers their lives. It has three years to pay another $525 million to the Securities and Exchange Commission. If you stretch out those payments over the years stated, well, that's hardly anything for a company that had revenue of $234 billion and profits of $16 billion in 2011.
And those numbers are nothing compared with what BP has already paid or set aside related to the 2010 oil spill. BP already put $20 billion into a trust fund for claims, state and response costs, litigation settlements and other costs. In February, BP said it had already paid out $7.8 billion from that fund to people and businesses affected by the spill, according to The New York Times. BP said it was selling $38 billion in assets to help pay its bills.
BP has already moved on. In fact, it raised its quarterly dividend this year to 8 cents a share and again last month to 9 cents a share. Not a lot, but that told investors plenty. Its net profit for the third quarter was $5.43 billion, up from $5.04 billion a year earlier.
This isn't the end of BP payouts related to the disaster. It still faces private and civil claims. Barron's reports that the company could get socked with a $5.4 billion fine under the Clean Water Act, and additional findings of gross negligence could up that fine as high as $21 billion.
But that possibility isn't scaring investors much Thursday. BP's ADR shares rose as high as $41 in morning trading, up some 2% from Wednesday's close of $40.16. By midday, however, the stock was only up about 0.4% to $4.31. Shares have been creeping up steadily this year from a low of just above $36 this spring.
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