BP up after settlement; energy stocks dip

NEW YORK (MarketWatch) � Energy stocks fell with the broader equities market Monday, as BP PLC�s settlement with plaintiffs in the 2010 Macondo oil spill failed to provide much of a lift for the sector.

Helping drag on energy stocks, the Dow Jones Industrial Average DJIA �dropped 15 points, as Exxon Mobil Corp. XOM �rose 0.8% and fellow blue-chip component Chevron Corp. CVX �ended the session with a drop of 0.3%.

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BP strikes Gulf of Mexico settlement

The oil major has reached a $7.8 billion settlement with residents and businesses over the 2010 oil spill. But BP still has a bigger battle to face with the U.S. government. (Photo: AP.)

Among sector benchmarks, the Philadelphia Oil Service Index OSX �moved down by 1.6%, with components Weatherford International Ltd. WFT and Nabors Industries Ltd. NBR �off by more than 4% each.

The NYSE Arca Natural Gas Index XX:XNG �ended about flat and the NYSE Arca Oil Index XX:XOI �dipped 0.2%.

Energy stocks in the S&P 500 index SPX �dropped 1%, on average, with First Solar Inc. FSLR �down about 7%, Alpha Natural Resources Inc. ANR �falling 6% and Peabody Energy Corp. BTU �down by 4%. On the up side, WPX Energy Inc. WPX �rose 2.8%.

BP clears legal hurdle, shares rise

U.S.-listed shares of BP BP �UK:BP �rose 1% after the oil major reached a $7.8 billion settlement with plaintiffs in a suit over the 2010 Macondo oil spill in the Gulf of Mexico. See story on BP�s latest oil spill settlement.

But BP could still be on the hook for up to $40 billion more in legal action from the federal government and other parties, according to reports.

�We remain cautious on BP while there are still significant issues around the cost of the spill to be resolved,� analysts at Bernstein Research said in a note to clients on Monday. �We also see limited organic growth and will want to see more signs of exploration success before becoming more positive.�

Raymond James analyst Pavel Molchanev said the settlement, �removes a considerable portion of BP�s legal overhang, though by no means all of it! .�

BP management believes that the company has already declared enough dollar loss provisions on the spill to handle upcoming legal costs, Molchanev said.

Among other stocks in Monday�s spotlight, El Paso Corp. EP �said it�s adjourning until Friday a shareholder vote on its merger with Kinder Morgan Inc. KMI �. The company said it�s allowing additional time for stockholders to consider a Feb. 29 Delaware Chancery Court opinion over the merger.

While the judge in the case didn�t block the deal, some El Paso shareholders argued that the merger contained conflicts of interest involving Goldman Sachs Group GS �and El Paso CEO Douglas Forshee.

The judge�s opinion focused on Goldman�s private equity arm owning 19% of Kinder Morgan while other parts of the firm served as a banker for El Paso; also Forshee had private interest in buying some of El Paso�s exploration unit from Kinder Morgan after the merger was completed.

Also in the energy spotlight, Exco Resources Inc. XCO �named Wilbur Ross to its board of directors. Ross, who runs private equity firm WL Ross & Co. LLC, owned about 13.7% of Exco Resources common stock, worth about $200 million. Shares of Exco fell 5%.