The share price of BP (LON:BP.) has been badly hit by the terrible oil spill in the Gulf of Mexico. Since announcing news of the explosion on 21st April 2010 (Share price c647p), BP’s share price has fallen 16% wiping more than £19bn (cUS$15bn) off its market value. Many leading commentators consider that despite the implications the sell off looks overdone.Richard Griffiths of Evolution commented that the “Drop in market cap is way beyond the likely cost of the accident”. His estimate is of a total net cost to BP of US$845m. Even after adding in US$2.5bn of punitive damages (similar to the sum for the Exxon Valdez disaster agreed in 2006) the numbers do not add up to the market cap drop.
However, it would take 52 days of uninterrupted spill at 5000 bbl/d for this incident to reach the size of the Valdez. However, with efforts thus far to stop the flow of oil failing, oil continues to spill into the Gulf, and the queue at the court house door grows longer by the day. This will be an interesting story to follow in the future.
We consider the issues and assess all the principal protagonists in this disaster. To read the our full commentary on this story please click here: http://www.stockopedia.com/document/view/40873/bp-bargain-priced-an-unprecedented-buying-opportunity
