Member Article

BP advances after agreeing Gulf spill settlement

Equity markets opened higher this morning following two weeks of strong gains that have seen the FTSE 100 break out of a two-month trading range. Sentiment was boosted following a G20 meeting of finance ministers and central bankers over the weekend, who stated they expected a “comprehensive plan” to emerge from the European Union summit later this month. The UK’s blue chip index put on around 1.4% in morning trade to peak at around 5540 points, although this was not to last as comments from Germany dampened hopes of a European solution. The German Finance Minister Wolfgang Schaeuble stated that, whilst European governments would adopt a 5-point plan at the aforementioned EU summit this weekend, the meeting wouldn’t provide a definitive solution. Markets reacted negatively having previously priced in significant developments from this event, the FTSE falling more than 100 points to its lows before finishing 0.5% weaker at 5437. Once again, miners and energy companies were a major drag on the index as their underlying commodities lost some ground.

BP shares finished top of the FTSE 100, the oil major benefitting from news that an agreement had been reached with one of its Deepwater Horizon partners, Anadarko, over the Gulf of Mexico oil spill that occurred last year. Investors learnt that the settlement involved dropping all claims of gross negligence against BP and also included a payment of $4 billion to help the UK energy giant cover the costs of the spill. Whilst BP is still in dispute with Halliburton and Transocean over their responsibilities, today’s news represented significant progress for BP with its shares closing 2.2% higher at 425.6p.

At the other end of the spectrum, shares in G4S tumbled following the company’s acquisition of the Danish outsourcing provider ISS for £5.2 billion, a price many commentators feel favoured the sellers. The scale of the deal, which will double the size of the security group, unsettled investors who presumably questioned how well such a large acquisition could be integrated, even with the company’s successful track record. The deal, which is to be funded by a combination of cash, equity and debt, requires a significant rights issue that may have also added to market’s nerves. The shares lost more than 62p, closing down 22% at 220p.

This was posted in Bdaily's Members' News section by John Dance .