Chillin' out till it needs to be funded
more from the gulf of mexico: anadarko’s operational ownership and $1.6b from the Spill Trust Fund of the government would amount to $5 Bn but Anadarko want’s 65% owner BP to pay up all of it. Federal Law needs to be changed to up the total compensation bill in view of estimates and Hayward and Obama got together to announce the $20b fund from BP to target recompensation.
BP’s woes continued to spill after last month’s spill now officially becomes financial business in view of losses of $30-40 billion from spill control and livelihood claims of local fishermen. Around 200000 drilling and ocean jobs have been lost in the Gulf of Mexico around the censure of Offshore drilling in the meantime. The repair work with a pouring of the ‘mix’ down the cap has actually increased the spill to 25000 BPD while the cap is collecting 15000BPD as BP increases that capacity.
As of yesterday, after losing 40% in the month, BP’s market value still remains an ‘awesome’ $99B. As it goes south from here, NYT surmises that a bid from Shell may be likely. Meanwhile Senate Democrats want to increase Oil spill liability to $10bn from the current $75 million and Tony Hayward is under increasing pressure to resign. BP churned out $17B in profits last year. This is “Beyond Petroleum” BP’s third disaster after one in Texas at a refinery and the next in the Alaska Pipeline project. Exxon paid only $4.3bn for the earlier largest spill and BP has spent $1 billion in the last one month.
Petrochina however dominates market values in the industry having overtaken Exxon Mobil’s $280bn Market Cap earlier in the year and Petro Brasileiro with a market valuation of $165 bn is ahead of Chevvron’s $147 bn and Shell’s $158 bn. On its own BP made a sizable $6bn in the first quarter.
Dealbook continues on its well informed sojourn with Andrew continuing where he left off in TBTF, keeping valuation clean and spiffy, in a much improved version of his personal writings:
Tony Hayward, BP’s chief executive, has insisted that his giant will weather this storm. BP is indeed a money machine: it turned a profit of nearly $17 billion last year.
“The strength of cash-flow generation in recent quarters has provided us with a balance sheet that allows us to fully take on the responsibility for the Gulf of Mexico response,” Mr. Hayward told employees last Friday.
But that hasn’t stopped the deal crowd from blue-skying potential outcomes. Here is some of the math:
BP’s costs for the cleanup could run as high as $23 billion, according to Credit Suisse. On top of that, BP could face an additional $14 billion in claims from gulf fisherman and the tourism industry. So while conservative estimates put the bill at $15 billion, something approaching $40 billion is not out of the question. After all, little about this spill has turned out as expected.
The company has about $12 billion in cash and short-term investments, but there is already a debate about whether it should cut its dividend out of fear that it could run out of money. Of course, it could sell assets or seek loans, which in this environment is still not that easy.