From the FT's Lex blog
The more BP inches towards the status quo ante, the glummer its shareholders seem to get. Despite the 14 per cent increase in its dividend to $0.08 a share announced with 2011 results on Tuesday, investors shaved 1 per cent off BP's share price. Chief executive Bob Dudley says that the dividend rise reflects "returning operational momentum and strong cash generation."
But even if BP is recovering financially and operationally, its shares remain weighed down by the Deepwater Horizon accident. BP will not be the master of its destiny until its legal problems are settled once and for all.
The company's toughest test since the accident almost two years ago begins on Feb. 27 with the civil trial to apportion blame and decide damages. BP would like to settle the case, but - rightly - not on any old terms. The company has picked up all of the tab so far for the ill-fated rig, and has set aside $37-billion of provisions. Even with 2011 earnings of $24-billion, net cash of $22-billion from operating activities, and settlements with third parties (including $4-billion from Anadarko), BP should not have to pay for the disaster indefinitely.
If BP can persuade prosecutors that the accident had multiple causes by multiple parties, it could avoid a charge of gross negligence under the Clean Water Act. That would enable it to cap its legal liability at $5-billion (it has provisioned $3.5-billion). A gross negligence charge would raise that to $22-billion. A settlement is in investors' interests.
Outside the courtroom, all Mr. Dudley can do is help BP to get its mojo back. BP's production growth for 2012, excluding its TNK-BP joint venture in Russia, is likely to be flat. So its $22-billion capital expenditure outlay this year means that it is running to stand still. With six big projects in high-margin regions such as Angola and the North Sea coming on stream this year, however, BP is at least back in the race.