Category Archives: BP

US government extracted $20 billion escrow fund from BP. How much did the Bhopal disaster victims get?

One cannot but empathize with the Bhopal disaster victims in India.  After lengthy court cases, and over many years, how much were they compensated? 

Contrast this with what the US government extracted from BP. 

Financial Planners Say BP Is a Gamble

BUSINESS
JUNE 10, 2010, 10:52 A.M. ET

Financial Planners Say BP Is a Gamble
By IAN SALISBURY

Some advisers are concluding that BP PLC, which just a few months ago seemed like a blue chip, is just too risky for their clients.

The giant British oil company, with a 100-year history and a $10.5 billion annual dividend, has seen its shares plunge by roughly half in a matter of weeks as oil from a well deep underwater gushes into the Gulf of Mexico. No one seems able to say for sure when it will stop, much less what the cleanup will ultimately cost.

Before the oil spill, BP was a good long-term holding,” said Keith Amburgey, a financial planner in Cresskill, N.J. “After the spill, the stock became a short-term speculative play.”

Mr. Amburgey said his firm began selling BP stock in early May, about two weeks after the rig explosion, eliminating BP holdings some clients had owned for years. By that point, he said, it had started to become clear that questions about the incident were going to influence the price of the stock for a very long time. Although he personally suspects the market has overreacted, BP’s legal and political jeopardy changed the risks and rewards of owning its shares for his buy-and-hold clients.

He likened the crisis to ones that have engulfed other seemingly impregnable companies recently, like Toyota Motor Corp., with its headline-making recall because of faulty brakes, and Goldman Sachs Group Inc., tarred by government charges over its business practices.

“This event served as a reminder of the benefits of diversification,” he added.

BP’s U.S.-listed shares rebounded sharply on Thursday after plunging nearly 16% on Wednesday as investors speculated that the company may suspend its dividend amid strong pressure from the Obama administration. BP is listed in the U.K. — where it is extremely widely held by investors including large pension funds — and in the U.S.

Some large brokerage firms have made moves too. Wells Fargo Advisors said it removed BP from its Diversified Stock Income Plan, a list of stocks with attractive yields and good prospects for hiking dividends that it provides to clients. Meanwhile, Wells’s sector analyst also advised conservative investors to consider other, less volatile energy stocks, according to a spokeswoman.

UBS AG said it helped arrange a recent discussion between its clients and BP investor relations officials. UBS’s United Kingdom research department, which covers BP, published its seventh update on the spill situation Monday. Although UBS still rates BP a buy, the note warned investors should be prepared for BP not to make its July dividend payment if U.S. political pressure intensifies.

For some, the BP debacle is a chance to make lemonade out of lemons. Bryan Wisda, a financial planner with offices in Scottsdale, Ariz., said he has several clients with big positions in BP, such as one accumulated by a longtime employee of Amoco, the U.S. oil company BP acquired in 1998.

While the BP positions never fit well with Mr. Wisda’s passive-oriented investment philosophy, he had been afraid that selling the holdings would generate an unnecessary capital gain for tax purposes. Now Mr. Wisda has been laboriously searching through the clients’ accounts for lots of stocks that were purchased at prices equivalent to BP’s current one and therefore can be unloaded without a tax hit.

While he concedes BP could snap back, he doesn’t think trying to make that risky call is in his clients’ best interest.

“It’s betting,” he said. “Investing isn’t really a bettor’s game.”

Financial Planners Say BP Is a Gamble

BUSINESS
JUNE 10, 2010, 10:52 A.M. ET

Financial Planners Say BP Is a Gamble
By IAN SALISBURY

Some advisers are concluding that BP PLC, which just a few months ago seemed like a blue chip, is just too risky for their clients.

The giant British oil company, with a 100-year history and a $10.5 billion annual dividend, has seen its shares plunge by roughly half in a matter of weeks as oil from a well deep underwater gushes into the Gulf of Mexico. No one seems able to say for sure when it will stop, much less what the cleanup will ultimately cost.

Before the oil spill, BP was a good long-term holding,” said Keith Amburgey, a financial planner in Cresskill, N.J. “After the spill, the stock became a short-term speculative play.”

Mr. Amburgey said his firm began selling BP stock in early May, about two weeks after the rig explosion, eliminating BP holdings some clients had owned for years. By that point, he said, it had started to become clear that questions about the incident were going to influence the price of the stock for a very long time. Although he personally suspects the market has overreacted, BP’s legal and political jeopardy changed the risks and rewards of owning its shares for his buy-and-hold clients.

He likened the crisis to ones that have engulfed other seemingly impregnable companies recently, like Toyota Motor Corp., with its headline-making recall because of faulty brakes, and Goldman Sachs Group Inc., tarred by government charges over its business practices.

“This event served as a reminder of the benefits of diversification,” he added.

BP’s U.S.-listed shares rebounded sharply on Thursday after plunging nearly 16% on Wednesday as investors speculated that the company may suspend its dividend amid strong pressure from the Obama administration. BP is listed in the U.K. — where it is extremely widely held by investors including large pension funds — and in the U.S.

Some large brokerage firms have made moves too. Wells Fargo Advisors said it removed BP from its Diversified Stock Income Plan, a list of stocks with attractive yields and good prospects for hiking dividends that it provides to clients. Meanwhile, Wells’s sector analyst also advised conservative investors to consider other, less volatile energy stocks, according to a spokeswoman.

UBS AG said it helped arrange a recent discussion between its clients and BP investor relations officials. UBS’s United Kingdom research department, which covers BP, published its seventh update on the spill situation Monday. Although UBS still rates BP a buy, the note warned investors should be prepared for BP not to make its July dividend payment if U.S. political pressure intensifies.

For some, the BP debacle is a chance to make lemonade out of lemons. Bryan Wisda, a financial planner with offices in Scottsdale, Ariz., said he has several clients with big positions in BP, such as one accumulated by a longtime employee of Amoco, the U.S. oil company BP acquired in 1998.

While the BP positions never fit well with Mr. Wisda’s passive-oriented investment philosophy, he had been afraid that selling the holdings would generate an unnecessary capital gain for tax purposes. Now Mr. Wisda has been laboriously searching through the clients’ accounts for lots of stocks that were purchased at prices equivalent to BP’s current one and therefore can be unloaded without a tax hit.

While he concedes BP could snap back, he doesn’t think trying to make that risky call is in his clients’ best interest.

“It’s betting,” he said. “Investing isn’t really a bettor’s game.”

BP shares slip to 14 year-low on oil spill

BP shares slip to 14 year-low on oil spill

June 10, 2010 – 8:20AM
British energy giant BP’s stock price plunged to a 14-year low in US trading on Wednesday as the Obama administration threatened to impose new penalties on it over the worst oil spill in US history.

Turning up the heat on the beleagured company, a senior US Justice Department official said after the markets closed that the department was “planning to take action” to ensure BP had enough money on hand to cover damages from the Gulf of Mexico spill.

Earlier, BP depositary shares trading in New York fell nearly 16 percent to close at $US29.20, their lowest level since August 1996, on growing worries about the costs the company will have to assume.

US Interior Secretary Ken Salazar told a Senate hearing he would ask the British oil giant to repay the salaries of any workers laid off because of the six-month moratorium on deepwater exploratory drilling imposed by the US government after the spill.

BP’s total bill so far, including cleanup costs, has reached $US1.25 billion ($1.5 billion) and the US government has already said it will have to pay billions more in penalties.

The White House echoed Salazar’s comments.

“The moratorium is as a result of the accident that BP caused. It is an economic loss for those workers, and … those are claims that BP should pay,” White House spokesman Robert Gibbs told a briefing.

White House showdown

BP believes it may be heading for a showdown with the White House over widening demands on spill-related costs, a BP source said. While the company has said it will pay for the clean-up and direct damages to those affected by the spill, the moratorium was a government decision and costs related to it were a different matter, the source said.

Earlier, the company’s stock closed down 4 percent in London on concerns the company might have to suspend its dividend payment. US politicians have been calling for this, saying the company should put its cash into paying for legal claims and environmental damage in the Gulf.

At a congressional hearing on Wednesday, one lawmaker asked US Associate Attorney General Thomas Perrelli whether the Justice Department had the ability to issue an injunction against BP to stop it paying its dividend.

“We are looking very closely at this and we are planning to take action,” he said.

BP officials have said they have enough cash to handle the crisis. But the market has shown less confidence. With Wednesday’s share price drop in New York, BP has given up more than half its market value since the crisis began.

“The confidence in BP being able to stop the oil leak and deal with the ecological aftermath has disappeared,” said TD Ameritrade chief derivatives strategist Joe Kinahan.

Illustrating analysts’ anxiety about BP’s dividend, in the past two days alone, seven have cut their expectations on the likely payout.

The cost of protecting BP’s debt against default hit new highs on Wednesday.

The spill began on April 20 after an oil rig exploded, killing 11 workers and rupturing the deep-sea well. It has caused environmental devastation along the US Gulf Coast and threatens lucrative fishing and tourist industries.

The Obama administration, facing growing voter discontent over its own handling of the crisis, has sought to distance itself from the company. President Barack Obama has also toughened his rhetoric in recent days and said in an interview this week he would fire BP CEO Tony Hayward if he worked for him.

In a further sign of the administration’s pressure on BP, Coast Guard Admiral Thad Allen, who is leading the government relief effort, demanded that the company provide more information and transparency on how it was meeting damages claims by individuals and businesses affected by the spill.

“The federal government and the public expects BP’s claims process to fully address the needs of impacted individuals and businesses,” Allen said in a June 8 letter to BP.

BP has paid out close to $US50 million in damages claims so far along the Gulf Coast — mostly to fishermen, shrimpers, oystermen and boat operators who say their livelihoods have been impacted by the spill.

Meanwhile, BP America President Lamar McKay, along with top executives from Exxon Mobil Corp, Chevron Corp, ConocoPhillips and Shell Oil Co, were called to testify at a June 15 congressional hearing that will look at the oil spill and America’s energy future.

At the scene of the spill, BP continued to siphon off oil from its blown-out oil well in the Gulf of Mexico.

Allen told reporters that BP planned to move another rig to the spill site on June 14. This would enable the company to boost its capacity to collect oil from the well to 28,000 barrels (1.18 million gallons/4.45 million liters) a day, he said.

Allen did not indicate this meant the flow rate of the oil could be as high as 28,000 barrels a day, but his comments are likely to underscore that neither BP nor the government have yet managed to determine just how much oil is gushing out.

Government scientists have estimated that the leak spews 12,000-19,000 barrels a day, with one estimate as high as 25,000 barrels. They are due to present revised estimates later this week or early next week.

Fouled wildlife refuges

The spill has already fouled wildlife refuges in Louisiana and barrier islands in Mississippi and Alabama. It has also sent tar balls ashore on beaches in Florida. One-third of the Gulf’s federal waters remains closed to fishing and the toll of dead and injured birds and marine animals is climbing.

BP’s latest containment effort, which follows a series of earlier failed attempts, involved placing a containment cap with a seal on a deep-sea pipe from which the oil is gushing.

But the ultimate solution to the leak lies in the drilling of a relief well and that won’t be completed before August.

Reuters

http://www.smh.com.au/business/world-business/bp-shares-slip-to-14-yearlow-on-oil-spill-20100610-xxep.html

BP OIL SPILL: ECONOMIC IMPACTS WILL BE FAR AND WIDE

 

The continuing BP oil spill disaster has grabbed headlines around the world for weeks, but estimates of its economic impacts are only beginning to be assessed, and many will stretch out for years to come. The oil disaster is already being labeled the worst in American history, and with hurricane season fast approaching in the Gulf, the additional moniker of “Oilzilla” has also been coined to communicate its potentially monstrous effects.

BP oil leak  – Obama and BP

The Exxon-Valdez polluted 1,300 miles of coastline with 11 million gallons of oil. In the first year, the state of Alaska lost over $5 billion in diverse economic activity. Eventually, Exxon was forced to pay $3.5 billion in clean-up costs and fines. Within the first week, local wildlife was decimated, a loss valued at more than $218 million.

Bp poil leak  Obama economic 

However, the Exxon-Valdez proved that the first year of losses is only the tip of the “oil-berg”.  Twenty years later, some Alaskan species, primarily the herring, have yet to recover, and the commercial fishing industry continues to struggle. Thousands of gallons of oil still remain trapped in the sand and will require many decades to degrade.

The BP oil leak has already defiled the Gulf with over 30 million gallons of crude, nearly three times the Exxon-Valdez amount, and with no end in sight. The economic devastation to Louisiana has been immediate. It has contaminated 100 miles of coastline, polluted coastal wetlands, and threatens national wildlife refuges, the home for many endangered species. The state of Louisiana was also forced to shut down fishing in the area. Commercial fisherman that harvest nearly one billion pounds of fish and 3.2 million recreational fishermen were shut down in the process.

The economic carnage does not stop there. The Gulf States, from Mississippi through Florida, have suffered from both curtailed fishing operations to severely reduced tourism when most were counting on a favorable travel season to overcome the recession. The Gulf accounts for over 70% of the nation’s shrimp output, according to federal statistics. Due to the spill, roughly 22% of the Gulf is closed to seafood harvesting, thus idling oyster and shrimp boats that operate within the 55,000 square miles of sea now off-limits. Restaurants as far away as New York are already feeling the rise in fresh seafood prices. However, large grocery chains buy their shellfish from as far away as Thailand and Indonesia, but demand for those products should increase very soon.

While seafood prices are rising, tourism is unfortunately falling. Occupancy rates are down 90% in some regions along the Florida panhandle, and the threat of a dismal summer travel season will only increase when higher gasoline prices at the pump curtail family travel plans. While financial pundits have focused lately on Euro to Dollar charts, they soon will be decrying the impacts of rising transportation costs, which affect nearly everything from the food you buy to all retail products in general.

Major concerns do not stop with inflation. Of larger concern to Louisiana are the lost jobs from the oil industry if their operations are curtailed or if they decide to move their rigs to other locales. $70 billion alone has been assigned to that impact, far greater than the $15 billion figure tossed around for current economic damages and clean-up expenses. The Gulf shipping industry is also threatened. If the Gulf becomes a barrier to commerce, the tax and revenue impacts on local port authorities and import/export businesses will be devastating.

And what about BP Oil? The company is the largest oil producer in the United States and fifth in the world, but its stock has plummeted 34% since the explosion in April, destroying $96 billion in wealth in the process. BP PLC has thus become a likely takeover candidate by another oil industry giant.

Although investors may be searching the Indonesian stock exchange for growth opportunities, Gulf fishermen are pondering another long-term issue. Fish spawn in deep water, and future generations of fish are already being destroyed by current contamination. Glen Brooks, president of the Gulf Fishermen’s Association, recently opined, “All that larvae is up in that water. Those are fish we’d probably be catching six to 10 years from now.”