Another bad morning for BP, which saw its share price slump a further 11% when the markets opened after President Obama’s latest round of unpleasant BP-bashing (before recovering slightly). With BP still under massive political pressure in the US, its clean-up bill edging ever closer to the £1bn mark, and oil still pumping out of the sea bed, it’s easy to see why investors are nervous. But does that really justify a share price of 345p, its lowest since 1997? BP certainly doesn’t think so. And since so much of the anti-BP (and anti-British) rhetoric in the US is essentially political, it’s hard to escape the feeling that the market reaction has now gone completely over-the top.
This latest share price dip follows news that the US might take legal action to block BP’s dividend and force it to compensate jobless workers, while the oil giant admitted that clean-up costs were already at $1.4bn. It means that BP has now shed almost half of its value since the Deepwater Horizon explosion – a loss of more than £50bn for its shareholders. As a result, it's now being talked about as a possible takeover target, a prospect that would have been unthinkable a few weeks ago; Standard Chartered has even floated the idea of a bid from PetroChina, and although we suspect this is the longest of long shots (surely the US will never let China buy BP’s US assets?), it shows how much times have changed.
Politically, it’s expedient for Obama and co to pin all the blame on BP for the spill. With the Congressional mid-terms coming up in November, and the Democrats likely to take a shoeing, a bit of oil company-bashing is unlikely to lose anyone any votes. But their anti-British rhetoric is getting increasingly distasteful: in addition to the President's rather un-Presidential 'ass-kicking' comment, one delightful Democratic congressman (Anthony Weiner) apparently opined on TV this week: ‘Whenever you hear someone with a British accent talking about this on behalf of British Petroleum they are not telling you the truth'. It’s also misleading: US companies were also involved in building and maintaining the rig, and US regulators were supposed to be supervising it. So why aren’t they getting a similar amount of flak? Hmm, we wonder…
What’s more, BP’s importance on both sides of the pond – it’s a big dividend-payer to both UK and US shareholders – means that it deserves a fairer, more balanced and less hysterical hearing (indeed, as one of our few world-class companies, it should arguably be getting rather more vocal support from the UK Government, which seems far too nervous about upsetting Barack). Otherwise its share price will continue to take a kicking. But we're inclined to agree with those analysts who argue that despite the uncertainty that shrouds BP's future, the current sell-off has gone too far.
In today's bulletin:
Obama's bashing sends BP shares to 13-year low
OFT launches new probe into big investment banks
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