WTI $56.93 -3c, Brent $62.07 +6c, Diff $5.14 +9c, NG $2.82 +4c
Oil price
The oil price was modestly up yesterday lunchtime in the US preparing for a quiet long weekend, the NFP numbers were in line at least with GSach’s best guess although there was a revision down of previous data, the greenback had fallen giving crude some support. Then the rig count came out and Baker Hughes said that overall rigs were up 3 at 862 and in oil were up 12 at 640. This was the first rise in 29 weeks, since December in fact and whilst was entirely predictable took the best part of a dollar off the price. This morning the price is about 30c off the US close as Europe prepares for the referendum in Greece which is looking quite close at the moment.
BP
So, BP has finally achieved a settlement with the US Federal Government and will pay another $18.7bn in civil penalties and damages to Federal, State and local Governments. The good news is that, apart from the fact that a settlement has been achieved, is that it is over 15-18 years and partly tax deductible, also it could have been worse with the top end of spillage numbers, finally the payments can be accelerated if BP has a change of control…The bad news is that having already cost $54bn ( like Christopher Columbus they laughed at me 3 years ago when I pencilled in a $55bn total) it isn't quite over yet, there will be more settlements to the individuals and local businesses and the class action of 2012.
BP has justifiably been a miserable performer since Macondo and has down-sized significantly, so what should investors expect from now on? The much mooted takeover is now more likely- no US company could touch it while it was toxic with litigation- but by no means a certainty. Having tied their hands behind their backs with dividend promises the cash flow situation is not ideal and don't forget that they have the minor matter of Russia to deal with, the Rosneft investment may prove to have been another poor call. Potential bidders may have their own Russian investments which could help, but quite a lot of the family silver has been sold off and whilst now undoubtedly more vulnerable, is far from a slam dunk, pencils will be sharpened in A&D departments but with no…
