NorthIowaToday.com

Founded in 2010

News & Entertainment for Mason City, Clear Lake & the Entire North Iowa Region

For BP, restoring its image is a bigger task than paying billions

By Ronald D. White, Los Angeles Times –

British oil giant BP can easily afford to pay the $4.5 billion in oil-spill settlement costs announced Thursday, but analysts said a more difficult task may be rebuilding its reputation.

BP agreed to the fines and other payments to the federal government and others and pleaded guilty to 11 felony counts related to the Deepwater Horizon oil rig explosion in the Gulf of Mexico that killed 11 workers in April 2010. It also agreed to a misdemeanor count under the Clean Water Act, a misdemeanor count under the Migratory Bird Treaty Act and a felony count of obstruction of Congress.

“The real fallout is not financial; the real fallout is trust,” said James S. O’Rourke, a professor at the University of Notre Dame and an expert in business communications and reputation management.

“It will take some time for investors, employees, communities, business partners, regulators and others to answer a fairly direct question for themselves: Do we trust this management team to deliver on the promises they have made?” he said.

In the two years since the fatal accident and subsequent oil-spill disaster, drilling in the gulf is almost back to pre-accident levels, government statistics show. In fact, BP remains active in the gulf, operating seven rigs and planning as many as two more in the next year.

In the most recent quarter alone, BP posted sales of $93.1 billion and net income of nearly $5.2 billion. The company has taken charges of $38.1 billion to cover its liability from the accident and on Thursday said it would add $3.85 billion to that amount.

Smaller and in some ways more nimble after shedding about $35 billion in assets to prepare for a costly series of Deepwater Horizon-related settlements, BP remains “one of the world’s largest energy companies,” said Oppenheimer & Co. analyst Fadel Gheit, with considerable proven oil and gas reserves, strong oil production numbers and 24 refineries. BP recently agreed to sell its Carson, Calif., refinery and other Arco assets to Tesoro Corp. for $2.5 billion.

That financial strength led some consumer advocates to complain about the size of Thursday’s settlement. Tyson Slocum, director of public advocacy group Public Citizen’s energy program, said the deal showed “zero deterrence” because BP previously paid a fine and pleaded guilty to a criminal charge from the 2005 Texas refinery explosion that killed 15 people.

“The settlement is inadequate to address BP’s repeated criminal conduct,” Slocum said.

As it has in the past, BP expressed regret Thursday for the 2010 incident and reiterated its promise to pay all “legitimate claims.”

“We apologize for our role in the accident,” BP Chief Executive Bob Dudley said, “and as today’s resolution with the U.S. government further reflects, we have accepted responsibility for our actions.”

Wall Street investors, at least, seemed to be relieved by Thursday’s announcement, sending BP stock up 14 cents, or 0.4 percent, to close at $40.30.

The fact that BP has been in this position more times than any other oil company during the past seven years is what will make BP’s other task of rebuilding its reputation so difficult, experts said.

“A corporation effectively pleading guilty to these felony counts, that is a big deal,” said Bruce Bullock, executive director of the Maguire Energy Institute at Southern Methodist University. “It simply hasn’t happened before in this industry at this level.”

But others say BP is having some difficulty finding partners to drill its wells.

“BP does exploration and they own the wells, but they contract out the drilling to other companies,” said O’Rourke of Notre Dame. “They have had difficulty in trying to secure partnerships with other ventures, particularly in the gulf.”

BP faces five years of probation and will undergo scrutiny by two appointed monitors. BP said in a statement that it could be barred from doing business with the federal government because of its guilty pleas but “has not been advised of the intention of any federal agency to suspend or debar the company in connection with this plea agreement.”

Joe Hahn, an associate professor at Pepperdine University’s Graziadio School of Business and Management, said that BP will remain an attractive partner for some companies because “of their mineral holdings, and they still have a lot of highly regarded technical staff and expertise.”

0 0 votes
Article Rating
Subscribe
Notify of
guest

0 Comments
Inline Feedbacks
View all comments

Even more news:

Watercooler
Copyright 2024 – Internet Marketing Pros. of Iowa, Inc.
0
Would love your thoughts, please comment.x
()
x