Following are some initial responses to the deal:

KIM FUSTIER, OIL & GAS ANALYST AT EDISON:

"On the Clean Water Act element – for the longest time that was seen as the biggest moving part and potentially the biggest liability and the most damaging for BP ... At $5.5 bln this is at the low end of the range, which is pretty positive. I went back to my old notes from end-2012 and first half of 2013 and at the time I was expecting a CWA charge of about $10 bln.

If you look at the tax impact, CWA fines and criminal penalties are not tax deductible. But natural resource damages and state claims are tax deductible. So the view we had was that BP was always going to push towards maximizing NRDA and state claims, as opposed to Clean Water Act fines.

It’s a win-win for both because the government can say it’s the biggest settlement of all time and BP has managed to spread it out and shift quite a bit of the liability into the tax deductible bucket."

JOE RUNDLE, HEAD OF TRADING, ETX CAPITAL:

"There's probably some relief that there is a settlement and that they can move on. It’s broadly positive for the stock.

BP had been mentioned as a takeover play since this trouble. Companies have been slightly hesitant to make a bid while this has been hanging over it, so I think it does clear the way for a potential bid."

PAVEL MOLCHANOV, ANALYST AT RAYMOND JAMES:

"The total amount -- $18.7 billion -- obviously is a massive payout, but it's spread over 15 to 18 years, making it quite manageable from a cash flow standpoint.

Most importantly, this settlement finally draws a line under the Macondo disaster -- lifting the legal overhang, once and for all.

While the federal court in New Orleans was getting ready to set BP's Clean Water Act fine as part of the long-running civil trial, today's news represents a full settlement with federal, state and local governments, thereby making the trial a moot point."

MICHAEL HULME, COMMODITY EQUITIES FUND MANAGER AT CARMIGNAC GESTION:

"Good to get this under their belt and the crucial part is the resolution of the CWA fine and the staggering of the payment, which means the present value of the liability is around $10-12 billion.

On a valuation basis the company is probably fair value here with some risked downside given outlook for earnings and lack of growth visibility. Not especially cheap, and don’t think this will stimulate much M&A interest."

ANISH KAPADIA, MANAGING DIRECTOR, INTERNATIONAL UPSTREAM RESEARCH AT TUDOR, PICKERING HOLT AND CO:

"It’s a short term positive, but overall the size of the settlement is a big number for BP to digest and an additional burden for the balance sheet. It is still a liability.

It will allow them to focus on growth but I don’t think they have the balance sheet to do so.

You still have some additional issues we are assuming another of $1 billion on top of the settlement."

JEAN-PIERRE DMIRDJIAN, LIBERUM ANALYST:

"This settlement brings clarity and certainty for the future payments so that is sort of a relief.

The settlement seems to mark the end of many years of uncertainty and that is good news.

BP management can now focus entirely on operations, especially in the current challenging environment."

LONDON-BASED ENERGY FUND MANAGER:

“This is a reasonable result -– the Clean Water Act damages have come in towards the bottom end of where they could be but this reflects the fact that BP spend an enormous sum of money on clean up. To have then charged them an egregiously large fine would have been quite unfair.

On the natural resources damages, I would have said it would have been more like $3-$4 billion, but it’s probably twice that. The state economic loss claims -- again a similar number.

So they’ve won on the Clean Water Act but lost on the other two numbers, and it’s ended up being a bit of a score draw.

What is surprising is that it’s paid over 18 years -- if you look at Transocean, it was paid over five years, and I was expecting a number between three and five years. So overall, this is more than equitable to the U.S. but it is also equitable for BP."

TERRY TORRISON, MANAGING DIRECTOR AT MCLAREN SECURITIES:

“OK, it’s a lot of money, but the good thing is that it’s now done and dusted and it’s behind them.”

JAWAID AFSAR, SALES TRADER AT SECUREQUITY:

“They have managed to draw a line under this longstanding dispute and can now start afresh.”

(Reporting by Sudip Kar-Gupta, Dmitry Zhdannikov, Liisa Tuhkanen, Ron Bousso and Claire Milhench; Compiling by Pratima Desai; Editing by David Holmes and Mark Potter)