Company Formerly Known as British Petroleum Returns to Gulf of Mexico

Michael Teague  |

After nearly four years of exclusion from bidding on new exploration contracts and leases in the Gulf of Mexico, British oil major BP plc (BP) revealed that it has reached an agreement with the US Environmental Protection Agency allowing it to once again compete for business in the nation’s Southeastern coastal waters.

The administrative agreement between the vertically integrated oil and gas giant and the US regulatory agency was the result of lengthy negotiations, and subjects the company to a supplementary set of ethical, safety, and corporate governance standards, as well as the oversight of an independent auditor tasked with conducting compliance reviews on an annual basis.

These concessions, however, will cost the company far less than what it has already paid to rehabilitate its image and fight legal battles in US courts. So far, BP has parted with nearly $40 billion in assets to both help with cleanup and compensation, as well as appeal settlement decisions down to lower amounts. The latter effort in particular has yielded some results of late; a New Orleans judge is currently assessing the company’s liability for the 2010 explosion at an offshore drilling rig that resulted in the deaths of 11 platform workers, and sent some 5 million barrels of crude into the Gulf of Mexico.

Two other companies, namely the rig’s owner Transocean Ltd. (RIG) and the already-infamous field services firm Halliburton (HAL) were involved in the project and their share of the responsibility will be determined in the same decision. On its own, BP could find itself facing up to an additional $17 billion in fines.

Despite its exile from new projects, BP is the second-largest overall producer in the area, and the timing of Friday’s announcement is notable in that it arrives just ahead of next week’s auction of drilling rights in Gulf.

Along with most of its “supermajor” peers, BP has struggled to convert on the US shale boom, and along with Royal Dutch Shell ($RDS.A) is in the midst of rethinking operations and projects on the US mainland. While Shell has been selling off US shale assets, both companies have mulled the possibility of spinning off what remains into standalone businesses that would be able to compete with the independent drillers who so far have benefitted the most from the shift to unconventional resources.

Heading toward the closing bell, shares for BP were impervious to the news, ticking up a modest 0.25 percent to $47.71 on volume of about half the company’s three-month average at 2.286 million shares.

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