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Fears for BP start to evaporate
BP shares look past their worst now the Deepwater Horizon well has been capped and the US says three quarters of the oil has evaporated or been captured.
Markets
by Deborah Hyde on Aug 05, 2010 at 14:39
BP shares are on the rise again as recent news flow suggests the worst case scenario on Gulf of Mexico related costs and penalties and on the outlook for the business may prove to be too pessimistic.
Over the last few days BP has sold its business in Columbia, appears to have stopped the flow of oil from the Horizon Deepwater well and heard the US authorities believe most of the oil leaked in the past three months has either evaporated or been captured or cleaned up.
BP share price ignores good news
Although BP's share price has risen this week, BarCap analyst Lucy Haskins who has been downbeat about the oil giant's prospects throughout the crisis believes the market is now undervaluing the good news.
The total spill is now estimated at 4.9 million barrels which means the final bill under the Clean Water Act will be lower than many have forecast and the maximum BP will have to pay has fallen to $21.1 billion (£13.2 billion) from $26.8 billion (£16.8 billion).
Under the legislation BP has to pay a fixed sum per barrel spilled. BP has assumed the fine will be $1,100 per barrel while many analysts have assumed the higher rate of $4,300 which will become payable if the company is found to have been grossly negligent.
Haskins also said the assets in Colombia were sold at ‘cracking’ price. All of which has prompted her to lift her price target to 450p from 430p.
And Haskins believes BP’s plans to sell assets worth as much as $30 billion put it in a ‘sweet spot’ as sales at a high per barrel price could mean analysts will have to upgrade their assessments of the valuation of its whole portfolio..
BP will never be the same again
Before the disaster, which killed eleven workers, BP's shares had had a good run. It had survived the downturn largely intact, managed to maintain its dividend and was looking forward to further growth.
Within two months of the accident shares had plunged from a three-year high of 648p to a 14-year low of 302p as the group struggled to contain the flow of oil and an outraged US government forced the group to set aside $20 billion to pay compensation claims, forcing the group to suspend its dividend and to announce the sale of some of its oil and gas acreage. For some there was a real fear the company would not survive the crisis and the cost of insuring BP debt soared amid fears it might default.
There remain uncertainties about the likely costs BP will have to pay, especially since we do not know yet whether the company will be found grossly negligent which would mean higher penalties but might also affect the company’s reputation and ultimately thwart its efforts to grow.
Either way, BP has now announced plans to sell around 8-10% of its production to help shore up its finances, is expected to pay a lower dividend when it begins paying them again and will be a smaller business in the future.
9 comments so far. Why not have your say?
fatcat
Aug 05, 2010 at 19:46
And thank that slimey good for nothing moron Obama for that. Just remember this next time you go to buy anything american with your reduced income from your pension fund. I say screw America but smile as well as he will lead them to the pit they deserve. Never thought I would think let alone say this .
report thisThoughtfull
Aug 05, 2010 at 21:20
I agree whole heartedly. Avoid buying anything from the USA folks and give them a touch of Obama
report thisAnonymous 1 needed this 'off the record'
Aug 05, 2010 at 21:22
OK, Yanks, close down all your exploration & production wells WORLD-WIDE & check that there is no possibility of the same happening elsewhere.
Haven't heard too much on the News about the spill in China. Did someone say it was as big a spill as you say you suffered in YOUR poor home country.
report thisalan thorburn
Aug 05, 2010 at 21:22
Could not put it better myself, fatcat.
report thisbwanakuba
Aug 05, 2010 at 21:41
Fully agree with all comments above. What does OBama think of
himself?? 3/4 th of oil is cleared ; rest will look after itself. Obama ought
to know that accidents do happen in life !!! Lot of them round the
corners of bedroom !!!! You just face it and accept it as an expression
of DIVINE will rather than making a mountain out of a molehill !!!!
report thisjoe stalin
Aug 06, 2010 at 08:34
In total agreement with all of the above! Obama and his adminstration mugged BP while our Eton-educated wets looked on no doubt fondly remembering their fagging days when it was best to say nothing for fear of being next . While there is no denying that there was polution there is no doubt whatsoever that Obama deliberately urged the US media to whip up anti BP sentiment in order to crew an exorbitant amount of money out of the company. I remember one senator standing up admitting his embarassment at Obama's shamehul behaviour. I hope BP is getting its ducks in a row legally and ensure that those that were also responsible cough up.
report thisJ
Aug 06, 2010 at 08:45
It is time for our Government to stand up and say that the BP situation was not as bad as the US administration has loudly bad-mouthed and BP took an unfair deliberate bashing.
report thisTaff Trader
Aug 06, 2010 at 10:45
This is the first time I ever seen on this site such unity about old silver tounge Obama. Where is his deplomacy and statesmanship now? Playing the polictical role for his 'fellow Americans' Funny how the the good o'l boys and Texan crooks and ex-vice presidents ain't saying much to air. I spent a lot of time in the Gulf and Texas City where BP bought the plant off the mass murders of Bopal and noboby talks about 16,000 dead and an estimated 35,000 badly injured. After all "they ain't like us are they" God bless BP, I've worked for you, I buy you gas and I bought your stock.
report thisFGog
Aug 07, 2010 at 16:58
We all know that an "unpopular man commits many crimes" and this has been a BP problem as far as the yanks are concerned
. The Americans should be grateful that it happened to a BP rig, they at least have the muscle and the decency to stand up, be counted, fix the problem and pay for the losses and clean up.
Smaller companies would have gone bust and walked away.
Even now BP's so called partners are all running for the exit screaming "NOT MY FAULT"
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