Ditch BP risk

It is now not totally inconceivable that, if the sanction war continues to escalate, BP could be forced to write off its near 20 per cent stake in Russia's Rosneft, which is worth about RUB490bn (£7.9bn). Rosneft contributed about 6 per cent of BP's underlying operating profits last year, although its minimal 2 per cent contribution to free cash flow means its troubles are unlikely to be any threat to the dividend. As well as the sanctions issue, a ruling by an international tribunal in The Hague could also spell trouble for Rosneft. The ruling ordered Russia to pay $51.5 (£41bn) in compensation to former shareholders of the now defunct Yukos oil company and explicitly stated that Rosneft was "the vehicle" used to expropriate Yukos's assets, effectively at the behest of the Kremlin. Moscow believes the verdict is politically motivated.

Admittedly, there are plenty of investors who will be willing - or indeed mandated - to stick with the energy giant through its current difficulties, particularly as there's still a juicy 5 per cent yield on offer. But several other things aside from Rosneft haven't been moving their way of late. At the beginning of July, a series of court rulings cleared the way for disgruntled UK investors to join the feeding frenzy over Deepwater Horizon. That means more third-party compensation claims in the offing for BP, including some UK pension funds.

And the decision came on top of a long-running and - as yet - unsuccessful legal campaign by BP to convince federal courts in New Orleans that a flawed interpretation of its settlement deal over the spill has allowed millions of dollars in payments to go to what it maintains are undeserving businesses. It's hardly surprising that some claimants have 'tried it on', but the Supreme Court already denied BP's request to block settlement payments, so the only definite beneficiaries from further legal manoeuvres on this issue will be the group's lawyers.

The big question over the disaster is yet to be decided, which makes it very difficult to come up with an informed valuation for BP. That's because we are still awaiting final resolution in US courts over whether the energy giant acted with "gross negligence" in the run-up to the Gulf of Mexico spill. The degree of negligence that the courts ascribe to BP will determine the level of fines imposed under the US Clean Water Act. Ahead of the court decision, it's impossible to give an informed estimate, but legal observers have quoted a range of $3bn to $17bn.