Monday, June 14, 2010

BP (NYSE:BP) Bankruptcy Fears Continue

Even though tensions were slightly eased between Britain and the U.S. over the BP (NYSE:BP) oil spill, which was taking on a more personal tone and attack from Obama and the Democrats, that doesn't deal with the underlying reason for bankruptcy concerns in the first place, which was the proposals that had been accompanying the Obama rhetoric.

The Democrats and Obama want to shut down the dividend of BP, and the latest, to have them create a $20 billion special account the Democrats can get their hands on, and who knows from there who they will decide to spend in the money on.

As far as the concerns over a possible bankruptcy, that is being primarily measured by, as it relates to the markets, to the number of puts being acquired, and they are skyrocketing as the share price of BP continues to plunge.

BP shares were at $31.50, as of 12:21 PM EDT, falling $2.47, a 7.27 percent decline.

75 comments:

Anonymous said...

BP comes from a very strong, cash-flow positive position. They don't need borrowed money.

BP is not an investment bank; it generates cash by extracting black gold from underneath the ground and selling it for cash.

Clearly BP's cash flow position has gotten somewhat worse versus the last quarter. However all it takes on BP's part to stay cash flow positive (or only maybe just a little bit neutral) is to divert dividend payments for the next few quarters into GoM compensation.

Let's say the GoM compensation escrow fund is the (albeit IMHO outlandishly large) $20B. BP could simply not pay its dividend for 2 years and it wouldn't have to borrow a cent to pay for the compensation.

Of course if Obama demands the escrow deposit NOW; and not spread over 2 years they would have to borrow money. If this does happen AND BP is unable to borrow the money at fair rates... frankly Obama is behaving like a loan shark. To insist on $20bn immediate payment; when BP's dividend payments alone clearly show they have the potential to pay over 2 years is crazy talk.

To go even further if Obama both banned BP from all US work AND insisted on $20bn immediate payment into escrow again... crazy talk.

The Obama would then be knowingly, willingly, deliberately driving BP into bankruptcy.

Generally it's in any creditors interest to ensure their debtor doesn't go bankrupt.

Obama and team have clearly shown they want to come down hard on BP. But they're not stupid. They will not demand so much that they drive the very company that is handling both the clean-up, plugging the well and paying compensation into bankruptcy.

Anonymous said...

a few months ago we saw Toyota go through the same thing, Now BP, tomorrow someother company...Media plays a big role in hitting on a company's reputation till it almost gets to bankruptcy, BP an oil and Gas major and which owns a whole lot of units not just in the Gulf but everywhere else in the world has really no major concern of a bankruptcy. i guess there should be techincal tickers just how much the media is supporting a stock.

Anonymous said...

bankruptcy is crap...BP has enough money if not it will pay the money in parts in several years

Anonymous said...

Are you 3 serious? Do you have any idea how low the $20 billion dollar figure is? Fishing alone is ruined in the gulf for the next decade (10 years @ 7 billion industry = 70 billion)....and so on. It's not that BP CAN'T come up with the cash...it's that at some point the company will think longer term and declare for protection to limit the damage over the next 2 decades as lawsuits and claims are worked out. Some type of protection was assured 100% when the operation to cement the leak failed, and the estimates of leakage more than quadrupled. BP will live, but under a different corporate structure to limit the endless amount of financial claims.

Tom said...

Whatever happened to "A friend in need is a friend indeed". Last I heard the Brits were still our friends. They've promised to pay all legitimate claims. Let's give them the benefit of the doubt. We need more engineers in Washington DC and a lot fewer pompous lawyers.

Anonymous said...

Two things, here. The comments above all assume normal conditions with no tinfoil hat political interference: that bankruptcy is determined strictly by cashflow and ability to pay one's debts.

Secondly, does anyone really think that either BP would actually file to get out from under the liability (it really can't) or that the Obamalama Administration would let it?

The scary part here is summed up in two words:
Chrysler. Bondholders.

I'm personally fretting over whether O will push and push and push, not realizing that he's killing the goose he's counting on to clean all this up.

I'm long BP, but not sure how long I'm long!

Anonymous said...

Not forgetting or withstanding the fact that it was built, run and blown up by you Americans in the first place...?

Anonymous said...

the disaster probably will go into
trillions of $s.
There is still no solution how to stop the leak.
I really think BP can go bankrupt.

Anonymous said...

yeah.. this is crap

Anonymous said...

I don't even see how this crap even makes it to Google's New Feed.

The second largest oil spill was in 1979, it was the largest in the United States ever... and worst in the Gulf, due to the Mexican Governments Oil Business, of course the Mexican Government did not pay to have the oil cleaned up, the tax payers did.

Bankrupting BP will only damage millions of citizens retirement funds, non-profit business who have investments with the company and many other businesses, if they go bankruptcy because of BP, it will only further delay the hope of fixing this country.

Let BP fix the problem over years as stated before.

Even the largest Oil Spill in 1979 took over 9 months to stop and it took 2 years to clean up. Thankfully this oil spill is not the same as that one, and hopefully it stops before that. If it took 2 years to clean-up that one, hopefully with today's technology advancements, we can clean it up much faster.

Sadly, thinks usually get worse, before they get better.

Anonymous said...

If I would own shares of BP,
I would sell them as quickly
as I can.

Anonymous said...

I don't know that people are more concerned about their investment then the pollution BP has created.

Anonymous said...

Technically speaking BP cannot go bankrupt can it? After all, it is an English business, not an American one.

Of course they do have offices here in the United States, and they could of course file for bankruptcy in the United States, however, they are still British and would still be able to conduct business, correct? Maybe just not here... or do what every business does, change its name. Maybe to AP... American Petroleum

Anonymous said...

BP Revenue as of 2009 is $246.1 billion... So I guess we will just have to see what happens.

Anonymous said...

If i would be the US gov. I would freeze all BP assets and use the money for clean-up, economical losses etc.

Anonymous said...

"Fishing alone is ruined in the gulf for the next decade (10 years @ 7 billion industry = 70 billion)....and so on"

What is your source for that? Oil naturally biodegrades. Fishing compensation we're looking at millions not billions.

It's the other 'stuff' that could run into billions... like the compensation for the workers that the US government laid off by stopping all drilling.

So yes I agree the scarey part is indeed:
"Chrysler. Bondholders."

But the situation here is I think incomparable to Chrysler. 25 per cent of BP stock is held by US pension funds (FT source).

It's one thing to bend the law so an unscrupulous hedge fund doesn't get a big pay day... it's quite another to screw BP resulting in losses for a publicly listed company.

Remember folks in addition to the 25% held by US pension funds; a further 14% is held by US individual investors. All in all if Obama starts ripping up laws to bankrupt BP he will be hurting MANY American citizens.

Anonymous said...

"Anonymous said...
Not forgetting or withstanding the fact that it was built, run and blown up by you Americans in the first place...?"

Well said. The so called techno blue collar workers have taken over the country through unions etc. and get paid much more than the real engineers and scientists with the result that they are getting marginalized and moving over to fields like financial engineering. Yes, the politicians are trying to milk BP for money they don't have (through taxes etc.) and gotten bold with big numbers (50 B$ etc.) after the stimulus (when they spent T$)

Anonymous said...

This Sovreign Immunity BS is just disgusting. FDA puts a company through hell to certify new drugs and then backs away - totally blameless - when product liability issues arise. Obama Administration backs Gulf drilling and Interior sells Gulf drilling permits, then everybody backs away - totally blameless - when a spill occurs. Two-faced, arrogant $%^#$%.

Anonymous said...

" Remember folks in addition to the 25% held by US pension funds; a further 14% is held by US individual investors. All in all if Obama starts ripping up laws to bankrupt BP he will be hurting MANY American citizens. "

+ 1

Anonymous said...

This Sovreign Immunity BS is just disgusting. FDA puts a company through hell to certify new drugs and then backs away - totally blameless - when product liability issues arise. Obama Administration backs Gulf drilling and Interior sells Gulf drilling permits, then everybody backs away - totally blameless - when a spill occurs. Two-faced, arrogant $%^#$%.

+ 1

Tjikii said...

You people are messed in the head. Start reading about how much Exxon was sued/fined over the Valdez situation. Now do some additional research. See how much the managed to get that reduced by, as well as how much they have paid. It is pitifully little. I would assume similar things will happen to BP. This stock is worth watching carefully as a brilliant buy opportunity in the not so distant future.

P said...

Few comments:
1.Whatever measures O admin will take, it will have to apply it on other players as well.
Do you really think

bonjovi said...

The end of BP is near and if you get a chance cash out on the next rally as there will be on more left this week hopefully. I realize that BP has the money but there are too many forces working against BP stock. One day this stock will drop 20% and the panic will take over. Remember sell BP as soon as you can.

P said...

Few facts and questions, in order to calibrate reality:

1. Whatever measure will be taken against BP, will automatically apply for other players.
Q: Given the influence of at least US companies. does anyone really believe in tens of billions for something, which is per se, operational problem that could happen to anyone?

2.BP has "only" 65% stake in the troubled project.
Q: Would not be fair to factor this fact in?

3. Even if the result would be stronger regulation and substantial compensation:
Q: Does not that automatically means, that only big companies will be able to afford any similar business.
Saying that, BP would paradoxically benefit from its own failure.

Ricardo G said...

A US Law limits amounts charged to Oil Companies as result of Oil Spill. This was done after Exxon Valdez resulted in $5 billion court award for damages. Since that award less than 5% was ever paid. It has been appealed and reduced.

BP stated it would not hide its responsibility behind this law to limiting its total liability. But if the requests become irrational it will surely defend itself with it.

What about the liability by the US Government Agency that issues Licences for drilling including permits. Why did they not require any spill or disaster clean up mensures. Did they not think it could ever happen. Oh yes in the BP report to the Licencing Agency they said the spill possibility was 0% and the agancy accepted it. So maybe Government will have to pay for negigence as well and not doing its job to be watchdog over Profit driven company.

bonjovi said...

The thing is people do not think in a time of panic and the big boys on CNBC tell people this stock is going to tank. It is all fear that they are promoting and people get scared. Sell BP now and buy it back at the $20.00 range. There is so much negativity with this stock that will drive it lower. I know it is not right but like I said the big boys have a position to drive it down to take advantage of other peoples woes.

Anonymous said...

Who cares about investments and stocks of BP. Just care about people in the Gulf who lost their livelihood and finding it hard for their ends to meet due to this oil spill. I heard somebody crying about British pensions funds (and even American) Forget about pension funds, think about the life and earning of the people who want to live a life now. Poor fisher man, hotel industry, tourism.....name it in the four states, BP made everybody's life a hell! They don't deserve any better until they pay all claims.

Anonymous said...

In a worst case scenario, is the US willing to sacrifice the 30% of sea food that comes from GOM or the 30% energy which comes from there as well, it is that simple!

Anonymous said...

BP could just ignore the US Gov as the rantings of the crazed and incoherent, leaving BP to pursue limitless damages from the American contractors who are actually to blame for this fiasco...?

Anonymous said...

I cant believe the utter nerver of obama - why attack BP, why send them downwards when at the end of the day it was an american company thats at fault not BP. You Yanks need to seriously get your facts stright first. As for President Obama, stop acting like a chump fool.

Anonymous said...

I will focus on "digits" "%" and statistics. I would not be surprised if ... Obama holds some BP stock :-)

It happened to BP it could ... to any other company. US gov knows about the - or + of such a drilling.

Good investment.

Anonymous said...

If Obama bankrupts BP we will all lose - BP albeit british employs more americans than british. What other oil company is going to want to drill offshore (and thats where the oil is nowadays) nowing that if anything should ever go wrong they are dead. Very brave for a country who is the worlds biggest oil user! Careful Barack this politial game you are playing will bite you in the rear end.

Anonymous said...

I wonder how many BP shares obama is buying at the moment :-) Come back George W

Anonymous said...

Hey. NO BUSH. WE CLOSED THIS CHAPTER

Anonymous said...

Well if BP goes bankrupt, which is highly unlikely, then someone is going to have to pay for the oil spill. I guess the taxpayers will have to fit the bill.

Anonymous said...

You guys are missing it! If I own a BP share, I should hang on to it and actually buy more.

The company is in a very strong financial position and can handle the blow. It is a great ooportunity to buy shares at such a low price and keep them as a long term investment!

Even if BP gets sold, one of the other big giants will buy it and so the stocks will be a good investment.

Anonymous said...

I wonder if this was Shell or Exxon, would they have spent so much and took in all this from the US?

Jered said...

bs

Anonymous said...

Transocean, Halliburton and Cameron must also shouder part of the blame for this accident.

Anonymous said...

Corporate responsibility. USA? Like Bhopal where 15k people were killed. Yes killed not have their livelihood damaged, yet the guilty fled and Corporate responsible USA refused to extradite them. Those who should face trial are still hiding in USA over 20 years on.

Anonymous said...

BP is only payin 65% of all fines rest are paid by anadarko etc., partners in the oil field

Anonymous said...

BP is strong, this stock good to buy now..i got some on franfurt...it will fly in 2 months...

Anonymous said...

great long term investment...just check this is the bottom...worst new are finish

Anonymous said...

crude oil is bio degradeable 10 years to clear? I don't think so.

If companies have to compensate, then governments should, for licencing oil platforms, for causing the deths of innocent people in war, drivers should for turning the key in their car

Anonymous said...

many investors lost money...it is goodtime to buy now..agree that BP holds 65 % in oil spill

Anonymous said...

As for most businesses, they are required to hold special policies.

There are many companies that have polices such as: Hazmat Insurance, Workers Compensation, Business Insurance, Chemical Insurance, Property Damage Insurance, etc...

One might think that all Oil companies would be required to hold different types of insurance for those on the rigs, another one for some type of liberty encase something happens to property (such as the ocean), unless many they do not cover such things, since the ocean is not technically owned by any one entity.

Though you would think that BP would have something that would cover something, at least those people who were killed on the rig and their families and something for those effected by the coast.

Anonymous said...

I'm surprised that no one actually looked at this article close enough to see that the writer was suggesting that BP is going to go bankrupt because everyone is shorting it. What a joke. A company goes bankrupt because of its balance sheet, not its share price. This website is nothing but garbage hype trying to get everyone to dump stocks so some Jack with puts can make some ca$h.

Digital Quack Quickness said...

Unlimited Profits must come with Unlimited Liability.

It's simple, they messed up, just pay up, and clean the mess. If the company can't handle that, then we have a bankruptcy procedure that is first rate in the world to handle this in a first rate orderly way.

We need to let Capitalism play this all out. There is a cost associated with profits as well. This is part of the cost that they should have factored in.

Anonymous said...

haha BP is not like your Citibank, or GM or etc...it has revenues and profits...oil price is going up in futures and profits will increase

Digital Quack Quickness said...

There's nothing wrong with the regulators coming in to deal with this whether we are asking them to post collateral or whether we are demanding accountability.

Do not forget that the oil spill is caused by executive negligence and hubris. Some would call it cutting corners.

It's simple, business comes with certain costs. When we try to externalize the costs, sometimes things happen. I guess things did happen ...

There's no bashing of any kind here, it's just simple rules of capitalism at work here. Regulation is part of capitalism.
They come in costs.

Digital Quack Quickness said...

http://www.kansascity.com/2010/06/14/2017273/investigators-bp-ignored-warnings.html Read this

Digital Quack Quickness said...

Seems like people are making this a UK vs USA. It isn't.

It's simply:

BP Oil spill disaster in the gulf of Mexico. Will BP handle all LIABILITIES?

That's all .. it isn't USA vs UK ..
Come on .. we're friends right? :-)

Anonymous said...

but, is BP UK responsible for what BP USA did? they do have businesses both in the USA and of course in London.

Could BP USA close its door, but keep BP UK open? Then, there isn't anything the USA could do... right? or wrong?

Anonymous said...

why close BP USA will close door ..NOOO...they can pay the fines from profits of BP usa only for a period of 10 years..is it not possible?

Anonymous said...

Thanks for the link Digital Quack, good article..

" Although the company's documents indicate that BP was aware of the risks of the single-pipe approach, the committee found, it applied for an amended permit with the Minerals Management Service and was granted it the same day, April 15. The decision saved the company as much as three days, the committee found. "

This should not of happen, they should not of issued a permit... That part is the governments fault, and BP's fault for not using four barriers, they just a single pipe barrier for gas coming out of the ocean floor. Though Transocean should be responsible as well.

It seems that this well was brand new and never used, this is probably why there is just SOOO much oil coming out.

Anonymous said...

Okay, so BP USA would be paying the fines from profits of BP USA only for a period of 10 years, though BP UK would not be effected, as both are separate entities, one might assume.

BP UK of course has much more money than BP USA.

Anonymous said...

$20B $100B $1T is not enough to pay damage the endless oil leak, began a new era of coast line area of use. Those who believe in God may think if greed harm innocent god never tolerate punishment must come 100 time more there is no doubt BP will escape and change their color suffer of those who being silent when innocent life destroy by evil corporate greed and power.

Anonymous said...

BP must have to file for BC but why innocent always suffer

Anonymous said...

Looks like BP is a secure short. Easy money. What has been damaged in the gulf can never be repaired. I estimate the "costs" to clean-up between $100B and $1000B if - only if - the well would be pluged, today.
But is it possible to plug it at all? If not, you can say bye bye to the gulf and the beaches from Floria up to Canada. 8-(

Anonymous said...

The Exxon Valdez was merely a speedbump for Exxon-Mobil.
The same will be true for BP and
anyone buying their stock now is going to make a lot of money over the next five years!

Al said...

someone posted this:
"the disaster probably will go into
trillions of $s.
There is still no solution how to stop the leak.
I really think BP can go bankrupt."



You need to show more evidence about how the costs for bp is going to be in the trillions.

You state that there is still no solution to the leak. I say, so what.

Anonymous said...

Has anyone done a search on "Pollution in the Gulf of Mexico". If you do you will see why the American Goverment is making such a fuss about BP.

This is Ridiculous said...

1st of all there is very little chance BP will go bankrupt even if immediate payment is demanded and damages not covered by insurance exceed what the company can pay. If that unlikely situation came up anyone from a private equity firm to Exxon mobile would be there to buy them out in order to acquire there contracts and wells.

2nd BP UK would be just as liable as BP US. They are not incorporated as separate entities but as Parent Company and Subsidiary.

3rd for those of you who think US contractors bare the majority of the responsibility, Both European based RT and France24 news networks as well as US based FOX and MSNBC news networks have all stated at some point during this spill, that in 2009 BP had significantly more regulatory violations than any other major oil company.

4th while I don't exactly agree with a lot of the decisions Obama has made I wouldn't call him stupid. In fact he is actually quite intelligent and probably realizes exactly what the ramifications of such a large fine would be. (Probably more of a political ploy to gain public support).

5th which ever one of you keeps referencing Exxon Valdez by this point its creating an Exxon Valdez size spill every day (MSNBC & FOX)

6th and final: Those of you who think its ridiculous MMA issued a special permit in 1 day let me give you some perspective: I have lived in DC my whole life and if there is anything I've learned it that nothing in this city gets done in less than a month unless theres an alterer motive or someone is greasing the wheels a bit.

Anonymous said...

Typical American reactions to sue for incomprehensible amounts... sue for pain and suffering and the like. You won't sing climate treaties but want to sue for an issue that actually originated from an American contractor.
While I am certainly up for seeing BP suffer for the perceived lack of action/delay. I also find it incredible that supposedly first world countries can't find a sollution to a seemedly basic issue. God help us when there is some nuclear/biological issue to deal with. I wouldn't feel safe living in the west, being on the receiving end of so many threats of that sort.
Perhaps those of us living in the "third" world are better off, after all when was the last time you recall a disaster such as this eminating from a lesser develpoed nation and certainly not the delay in sorting it out.
I am tired of politics and the talk that comes from it, you can suggest and threaten all you want but if you don't lift a finger it probably won't happen.
Save your suing culture and hurry up and help clean up your mess.... afterall it is YOUR backyard not ours!

Anonymous said...

I read some of the above comments and they can only come from Americans - Not one mention of Anardarko Petrol Corporation who own 25% of the lease, nor of Transocean or Halliburton or even Cameron International - could it be because all these are US companies

They also fail to mention that BP is not just British - it dropped "British" in the late 90's when it merged with AMOCO (American Oil Company) - 40% of its shareholders and employees are American

The legislators were also American who may have given BP an easy ride. Nor did they mention the American greed for oil

Did I hear one peep about Piper Alpha where 167 died (Occidental) or Bhopal where some say 30000 died (Union Carbide) - I don't remember any of this indignation when these disasters happened - but of course they happened in someone else's country and were US companies

We saw the same principle with terrorism - US funds the IRA for years allowing British women and kids to be killed - but that's OK - a couple of aeroplanes in New York and all of a sudden it's a global problem

Trouble with the US is it can do whatever it likes in other countries but as soon as it happens in the US there's aggression and venom. As some of the more enlightened contributors note that this is not a time for arguing but of consolidating to get the mess cleared up - BP didn't want this mess and is doing all it can to get it fixed - not that it hasn't made errors

One good thing that may have come from this anti British sentiment - we may not be pulled into any more US illegal wars

Grow up America and start to look at things from other peoples perspectives - you may learn something

This is Ridiculous said...

Sorry if my former post was unclear but am pretty sure I addressed many of the issues you mentioned in my former post even if I did not convey my point that well.
-I tried to made it quite clear where I was from as well as mention the corruption issues in the (6th and final) segment of my last post
- I don't believe I ever referred to BP as a solely British company just used the term BP UK when referring to it's corporate structure in segment (2nd) of my last post
-I am aware of the vast amounts of US citizens BP employs an the amount of stock Americans hold. However it had been mentioned by someone else in a previous post and I didn't think It needed further clarification.
-as for your comment "start to look at things from other peoples perspectives" I do believe I referenced as many European news networks as US news networks of both liberal and conservative persuasions.
-as for the other incidents in your post I did not mention in my former post: my post was getting kind of long and I did not want to bore whoever was reading it so I tried to keep it short. Also if you noticed all the points in my former post either contribute to or give an opinion on prior posts by others.
-as for your comment about terrorism I'm going to chose not to comment on that seeing as it is off topic and needs a whole other discussion board all in itself.

This is Ridiculous said...

PS. as to your comment about stopping the arguing and fixing the problem.

Unless your a BP executive or US government official there is not much you can do except volunteer to your services to help clean up the spill and that is a very far trip for most of us.

So debating the issue is the best way most of us can help (hoping someone who does matter reads our comments)

Anonymous said...

Obama is really 3rd rate politician. You don't pi*s on the guy who is trying to help you. Too many politicians in Washington have never experienced life in the real world.

This is Ridiculous said...

too many politicians everywhere haven't experienced life in the real world!!! (Thats why they're politicians).

Anonymous said...

BTW, BP equity position is not as strong as some have suggested. According to their balance sheet, their book value is only about $5/share, not $35

This is Ridiculous said...

They are referring to trading value not book value NYSE closed at about 30 a share for BP and doesn't reopen until 9:30am(est) which isn't for about 15min

This is Ridiculous said...

I mean 9am (est) 15mins ago

This is Ridiculous said...

pre-market only*

Anonymous said...

I'll declare a self-interest here, my pension fund has a lot of BP stock. Unsafe practices in BP? Not in my 30 years of experience in the Oil & Gas business. I've never had anything but the highest respect for BP and its staff, though I'll admit the GOM regional management (all Americans by the way) won't be getting onto my Xmas card list anytime soon.

I've actually just spent an interesting few hours downloading and backing up the many references to the GOM that include phrases such as "sewer" and "dead zone", before the local politicos wake up and get it all taken down. Wouldn't want anyone to forget that before Aril 20th the GOM was not quite the pristine environment that the current US President seems to believe.

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