BP Plc, Tony Hayward, Obama and Deepwater Horizon: the ‘Baracking’ needs to stop
President Obama's motivational skills are coming into question as he continues his tirade against BP Plc(LON:BP., NYSE:BP) and more particularly the company's Chief Executive, Tony Hayward, who has honorably been prepared to face the music, almost single handedly, since the Deepwater Horizon rig sank back in April. In contrast, BP’s Chairman Carl-Henric Svanberg has ‘conveniently’ remained largely hidden from view. Although, to give him credit the former chief executive of Ericsson is the only member of the board who has put his hand in his pocket and acquired a material number of shares in the company since the disaster, picking up 175,000 shares on 28th April at the heady price of 618.92 – they were considered cheap back then! Mr Obama’s first name apparently means “one who is blessed” in Swahili but his recent outbursts warrant the addition of another ‘r’ to reflect a more appropriate meaning!
It’s hardly helpful when the leader of the country starts openly bashing the CEO of the only organisation capable of sorting out the mess! BP has a responsibility to its shareholders and employees not just the fishermen of Louisiana and they aren’t going to agree to freely give handouts to everyone, whatever the merits of the claim. I can’t wait for BP’s legal team to get into full swing! Following another material fall in BP’s share price (currently 364p) leading equity analysts are doing their best to offer suggestions. Since 20th April, BP’s equity market value has now fallen by over US$81bn with the market capitalisation of Exxon ($288bn) now 2.6x BP’s ($112bn). It’s also worth noting that for the year ending December 2009 Exxon generated revenue of US$310bn and net income of US$19.2bn compared with BP’s US$244bn and US$16.5bn respectively. JPMorganCazenove (‘JPMC) points out that consensus eps estimates for BP have fallen, primarily they suspect due to the oil price fall (since 20 April, Brent has fallen 14%) – surely the clean up costs have something to do with it as well chaps!
BP currently trades at around 5.2x December 2010 estimates which is apparently almost half Exxon Mobil’s comparable PER of 10.7x. Assuming the dividend is maintained, which looks increasingly unlikely in the face of mounting US political pressure, the yield would be around 10%. BP’s Q1 2010 reported net assets were $104bn, so we are reaching that Benjamin Graham/Value investor moment when the shares are trading just above historical cost net book value. JPMC has pointed out that ExxonMobil trades on 2.6x net book value. JPMC’s Sum of the Parts (‘SOTP’) break up value of BP is approximately 950p share ($84 per ADR) with BP’s share price discount 57% and the ‘missing intrinsic value’ approximately US$159bn – all rather big numbers! Prior to this event, BP averaged a 23% discount to JPMC’s SOTP – the increased discount represents $91bn of equity value.
Morgan Stanley (NYSE:MS - ‘MS’) considers that the recent share price reaction is telling BP’s Board to show its hand quickly, rather than wait for the Q2 results (27th July 2010), both on the payout policy and on how it intends for BP (LON:BP., NYSE:BP) to provide a clearer line of sight on payment of future liabilities for the oil spill. They also consider that investors will want to see the board reiterate confidence in the management team. Without this, political pressure could continue to outweigh fundamental value. MS considers that clarity on these issues should support a significant bounce away from the bear case and a 2010 PE multiple of 4.4x (a 38% discount to the group).Many analysts have commented how much progress has been made with the containment effort, however, the pictures continue to show oil gushing from the well and until this stops entirely no one will have any faith in the figures being quoted. Citi has pointed out that BP’s cashflow generation remains strong and on their estimates the group will generate c$40bn of cashflow a year between 2011 and 2013. Capex of c$20-25bn pa leaves headroom of $15-20bn which is more than enough to pay the $10bn dividend and fund the oil spill response.The Obama administration clearly has little time for cashflow and financial statements and assumes that open BP bashing is all that’s needed.
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13 comments
I take it the individual who disagreed with the above I wrote is perfectly happy that the owner and operator of the rig in question(Transocean) is not subject to any dividend payment restrictions and political backlash, yet the corporation merely leasing the aforementioned services is politically hounded by various senators and told that it isn't allowed to pay a dividend?
Care to explain why you don't view this as extremely hypocritical please?
http://www.managementtoday.co.uk/news/1009833/bp-pressure-suspend-divi-obama-demands-more/
It might be unfair that BP is getting all of the blame for this (especially when Transocean, the operator of the rig, is going ahead with its own $1bn divi)
Assuming the above is true, why is Obama not being as vocal about Transocean suspending their dividend? After all, it is their rig that has caused all the troubles,it is their personnel operating the rig, and their safety record is appalling as someone else has pointed out.
Yet not a whisper from Obama. yet more evidence that he doesn't care who is responsible, merely that he wants his money and will go after the party with deepest pockets(to the detriment of UK pensioners) regardless of who is to blame.
Get some consistency Obama or seriously dampen UK / Us relations by your blatantly hypocritical and anti British actions.
Don't be surprised if Obama shafts Britain over the Falklands - the debate here will heat up now that Rockhopper has found a sizeable discovery.
My money is on Obama selling us out there too. The sooner that democratic president is got shot of the better imv.
I think it's clear that BP has responsibility for stopping the leak and for the clean-up as they are the operator, and also the owner of the oil - together with Anadarko and Mitsui. Whether BP is responsible for the incident itself is still to be determined (though my money would be on Transocean, Cameron, Halliburton).
Silly bloggers are to be expected but what's gone too far is the anti-British, anti-capitalism, ranting coming out of the highest levels of the US government in the hope of making political capital for the November elections. It's also expected for the US and UK governments to say that this won't impact relationships between the two countries; like hell it won't! The UK press's love affair with Obama is over.
"When you hire someone, it's still your responsiblility to make sure they are doing the job right"
No real wish to feed the troll, but when you put your car in the shop, Mr katred, sir, do you supervise the mechanic's work? Or, heaven forfend, should you require a hospital operation, do you supervise the surgeon?
Deep water drilling is risky. All engineering is risky. We do what we can to minimise these risks but accidents still happen. I could go into detail as to how industrial society has, over centuries now, developed new responses to new challenges - progress follows, but only after limits are tested. It is, after all, how America developed.
In the event of a catastrophe it is the test of a man, or a company, how he/they respond. My opinion is that Tony Hayward and BP have generally responded well. They are focussed on fixing the problem. That used to be America's forte - fixing the problem. Now I'm not so sure.
To me the ultimate irony is the coincident conclusion of the Bhopal trials. That disaster was created by an American company - Union Carbide. Where were their directors when a response was needed? Where was the American government's action? Hmmm.
Enough.
Lets just fix the problem first, then decide who to blame.
ftf
Ok, FANGorn, who's trolling? Not me. And if BP has no responsiblility, why did they put their name on it? And why would they have made money from it? If you, FANGorn, put your on name something, is it not your responsibility? Or are you saying putting your name on something doesn't mean anything? That fight is between BP and Transocean, not the U.S. and Transocean. When you hire someone, it's still your responsiblility to make sure they are doing the job right.
I never said BP had no responsibility Katred. I appreciate it is difficult for you to comprehend what I have written, but I have been absolutely clear.
You make it out as if BP has SOLE responsibility when clearly that is not the case.They do however have SOME responsibility obviously.But there are other parties involved that you strangely seem to ignore as having ANY responsibility(Transocean,Halliburton,Andarko,MItsui) despite all of them being involved.
So why the BP rant without taking into consideration these other aspects of the drilling.Hence my claim that you're trolling.Kapiche
Was particularly intrigues by....
"“I think BP is caught in this vortex and it’s going to be difficult for it to survive it.” Pressed on what the meaning of “difficult to survive” might mean, Dicker said it was difficult to say but that it might involve various sales of assets and formation of subsidiaries to contain damages."
Unlike Lehmans, BP has both the financial strength and cash flow to just go out into the market and initiate massive buybacks - from what I saw Lehman went bankrupt primarily because it couldn't effectively fund it's positions, ie it had a massive liquidity problem. BP, with Oil at $75/bbl certainly doesn't have those cash flow concerns. Their balance sheet is far stronger too.And they are a leading player in an inelastic commodity required by every single nation.they are not involved in fancy off balance sheet derivative products!
We have, in my view, passed the point of maximum fear, the only recourse now is a gradual improvement in BP's share price as things come more under control and the political rhetoric is toned downed significantly, both by Obama, those senators with hidden agendas, and the various trolls out there with a BP specific axe to grind when their focus needs to be more directed to the AMERICAN companies actually involved as well in this disaster.
Shares of BP (BP) surged into the close, rising $3.13, or 11%, to $32.33, despite a late-breaking announcement from the Attorney General of Florida, Bill McCollum,
http://blogs.barrons.com/stockstowatchtoday/2010/06/10/bp-florida-ag-asks-for-escrow-a-lehman-like-vortex-of-selling/?mod=rss_BOLBlog
latest from what i can see,,,,,
Eh no. It isnt BP who have either bought it, specified the specs , installed it or who are drilling, so stop trolling.
Transocean own the rig, and operate the rig. Kindly take your trolling elsewhere. As to your aspiration that BP is responsible - why nothing about Anadarko or Mitsui who between them own 35% of the operation?
Number one, it's BP who bought the thing, they ordered it, they specified the specs, and ok'd installation. It's BP who's drilling and BP who is responsible. Hayward's poor little me bit and the slamming here of another American company, given the history of BP's environmental irresponsiblilty do not in anyway justify this middle school play on words. Transocean? No, this is BP all the way. Hayward put himself out front? No - he doesn't have a choice people. What a horrible article.
Concur with your opinion. Hayward has, despite the odd gaff, played with a straight bat. But what of the senior exec for BP's American arm? BP, as a company, has, in my view, done absolutely everything and more to contain this problem even though they hold only 65%. None of the opprobium that has come their way(from Obama and various senators) has however has been meted out to either Andarko or Mitsui(holders of the remaining 35%), nor Transocean,owner and operator of the rig,nor anyone else involved. Not sure why the American populace are vilifying BP specifically when their attention should be focused closer to home.
Transocean in my view should be bearing the brunt of Obama's fury as it's their rig and expertise that BP has leased. The fact that it's an American company says it all frankly. I never had a high opinion of Obama, his actions to date merely reinforce that negative feeling. If he wants to play the anti British card then so be it.Next time he's looking for an ally to legitimise any foray into foreign territory he shouldn't be surprised if we Brits finally telling him where to poke it.
I agree, Obama is showing all the leadership skills of one of the former leaders of the Soviet Union, working with threats and abuse.
He has also clearly decided that 'bashing Britain' fits in with his political agenda, little caring if this affects how we Brits think about our relationship with the USA.
For BP, Tony Hayward has clearly decided to put himself out front. The new Chairman should have been there with him but it is now too late - he needs to be the one to go, resigning rather then being pushed, one would hope. The same thought needs to occur to three or four of BP's Houston 'mafia' too.