Another week, another set of doom-laden predictions about the ever-increasing rate at which oil might have been pouring out from that big hole in the bottom of the Gulf of Mexico. This time the US Geological Survey is saying that it could be as much as 30,000 – 40,000 barrels a day, twice previous estimates. Their figure is based on the not unreasonable observation that there is still an awful lot of oil escaping, despite the cap which BP has managed to fit retrieving some 15,000 barrels a day.
If correct – a big if given the frequency with which these figures are revised – the leak could be equivalent to an Exxon Valdez (previously the largest ever oil spill) every eight to 10 days. And Deepwater Horizon has been leaking for nearly a month and a half…
But investors seem to be taking a pragmatic view and have piled back into BP shares this morning after yesterday’s dramatic falls. The company has seen an eyewatering £56bn – nearly half its total value – wiped off its market capitalisation since the accident on 20 April. Shares hit a 13-year low of 352p yesterday, a level at which many fund managers seem to have decided they would be crazy not to buy. Shares are accordingly back up to around 398p this morning.
That’s just about it in terms of good news for the beleaguered oil giant, however. Boss Tony Hayward has confirmed the firm is considering whether to suspend its interim dividend payment to try and placate the increasingly foaming-at-the-mouth rhetoric emanating from Capitol Hill, while his chairman, Carl Henric Svanberg, has been summoned to meet President Obama next week for what promises to be a pretty heavy-duty meeting.
In fact the antics of Hayward and Svanberg are coming to look increasingly like a rather desperate attempt by a doomed tag-team wrestling duo to take on the invincible Big Daddy (played by El Prez of course). If the US administration carries on beating them up so publicly, the consequences for BP could be severe. Dark rumours of a Chinese takeover bid, should the share price continue to slide, are already circulating.
But there are signs of some moves to support BP – the chairman of insurer RSA, John Napier, has accused Obama of being ‘prejudicial and personal’ in his attacks on BP – and David Cameron has even dipped a toe in the water, calling on those involved to remember the economic value of BP to the nation. Not exactly a roundhouse blow to the Americans, but then there is probably enough intemperate language in this situation already.
Apart from the obvious imperative to stop the leak and clean up the mess (the cost of which is very hard to calculate but is likely to be onerous even for a company of BP's size and wealth), all this matters very much to UK plc. For a start, BP dividends account for a whopping 15% of all dividend payments on the LSE. Then there are all the pension funds with heavy exposure to BPs share price, not to mention all the jobs both direct and indirect which BP and its contracts provide.
If a battle for BP were to be joined, it would have the potential to make the outcry over Kraft’s acquisition of Cadbury’s look like a lover’s tiff by comparison.
In today's bulletin:
Oil leak 'doubles' - again - but BP shares up anyway
Insider trading rises as FSA bosses receive record bonus
MT Leadership Visions: Adrian Fawcett, CEO of General Healthcare Group
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