From the outbox of Meyer’s inbox:
No matter what the issue, getting a fresh perspective is helpful to understand the complexities involved. You’re not going to find a lot of “weeping and violins” for BP over here but in Great Britain, BP’s influence is felt across the country in the pension accounts of millions of people. Putting obvious blame aside for the Deepwater Horizon oil disaster, it’s interesting to see how the BBC is reporting on this story. Where as we’re concerned with the survival of our coastlines, they seem more concerned with the survival of the company. Perspective.
WHICH WAY FORWARDS FOR BP? By Laurence Knight writing for the BBC
In June, financial markets were briefly pricing a bankruptcy of BP in the next five years as an odds-on probability as a result of the ongoing oil spill in the Gulf of Mexico. Things are not so bad now. BP’s share price – which had more than halved since the Deepwater Horizon oil rig explosion in April first triggered the company’s woes – has staged an impressive recovery in recent weeks.
Yet talk continues to circulate of a possible strategic investor in BP – either as a welcome provider of fresh capital to the company, or an unwelcome opportunist sniffing a bargain. So what are the options now for BP?
BANKRUPTCY
On 16 June, the cost of buying financial protection for one year against a possible debt default by BP reached a staggering 10%. During those panicky days, credit markets were in effect saying that a BP bankruptcy in the next few years was more likely than not.
Things have calmed down since then, although the oil giant’s bonds still trade at prices comparable with companies rated “junk”, even though the credit rating agencies have yet to actually stick that ignominious label on BP.
The about turn has been extraordinary. Before its money and reputation began bleeding away in the Gulf of Mexico, the oil giant was considered the safest of blue chip companies, because its debts were so low and its income so high.
“I think markets are [pricing in] a scenario considerably bleaker than will prove to be the case,” says Alan Sinclair, oil and gas analyst at stock brokers Seymour Pierce.
He points out that just by cancelling its remaining dividends this year, the company should already have enough money in hand to cover what he expects to be the $6bn (£4bn) direct cost of the clean-up. That is about double what the company has already forked out to date.
You can read the rest of this story and many other pieces here.
