Save BP Plc - it's time for institutional investors to stand up to Obama
There has been lots of press coverage how the cut in the dividend would be a blow to millions of savers with approximately £1 in every £7 received by UK pension funds coming from BP (LON:BP., NYSE:BP). It’s also worth remembering that there are probably a large number of US pension fund holders as well. However, very little seems to have been made of the crucial role being played by the pension fund managers and large institutions who are the major shareholders in the oil giant. The more than 40% fall in share price hasn’t arisen through private investor selling, it’s been the big institutions and hedge funds who have been leaving the sinking ship. It’s surely time for the big pension fund managers to offer support in the best way possible by acquiring shares.All the leading institutional analysts take great pleasure in telling us how cheap BP’s shares now appear, however, their investment management brethren sitting across the trading floor appear reluctant to act.
JPMorganCazenove (NYSE:JPM) has this morning reiterated its view that BP’s entire US upstream and downstream business has a likely market worth in excess of US$100 billion. Goldman Sachs (NYSE:GS) has also reiterated its own Enterprise Value/Discounted Annualised Cash Flow based (that’s a mouthful!) target price of 600p (US$52 for the ADR) which includes an assumed US$23bn post-tax liability to BP (LON:BP., NYSE:BP). Goldman cites key risks as a failure in the relief well, a deeper cut to the dividend than currently forecast and materially lower oil prices. We disagree; the key risk in the short term appears to be inappropriate rhetoric from the Obama administration. Even House Speaker Nancy Pelosi is now getting in on the act criticising BP for their “lack of integrity”; remember Bhopal Nancy!To conclude, it’s surely time for the big institutions to stand up and be counted and offer whole hearted support to the management, shareholders and employees of BP (LON:BP.) by actively buying the shares.
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15 comments
Glenn Beck tries to explain Obama's dislike of the British here:
http://watchglennbeck.com/ (June 29th 2010.)
The President's Grandfather's fourth wife recalled that his Kenyan grandfather had been tortured on British orders after arrest as a suspected rebel.
Glenn is a great communicator of free market ideas and of history from a non Fabian perspective.
Shame there can be no British equivalent.
Hi Bugs,
yes, its talking about a production platform, that is the worrying thing. Could Obama's eco administrators do some Russian style paper work checking, decide that things are not in order and get production shut down pending a review of safety?. That is what the article was calling for. What about Thunderhorse?.
The Chicago machine's ethics seem little better than those of the Kremlin. If there is serious money in it for an oligarch (Soros) expect a Soros placeman administrator to push his interest. Glenn Beck points to some links between Soros, policy making think tanks and the Whitehouse. The Soroses and the Golman Saches appear to be able to get pretty much anything they want. Bail out the bankrupt counterparties to our winning bets with trillions of public money?, no problem. Shut down offshore drilling so that our second biggest holding has access to the rigs in its deepwater Brazilian fields?, done. Lend the same profitable company two billion to fund deepwater drilling?, here's the cheque.
I dont think Hayward is playing a bad strategy. He is avoiding blaming others who could very well be culpable, and is being open and transparent as reasonable whilst coughing up into Obama's political slush fund without a fuss. The well will be tamed eventually, and then the courts can decide what happens, rather than a grandstanding incompetent (and possibly corrupt) leftist president.
I dont doubt that flow rates may have increased significantly over time as elastomer BOP valves and other restrictions are eroded by the flow. I dont think that the initial flow rate guess was unreasonable or very wide of the mark, though it is now. Its a pity BP Amoco didnt retain its name, after all, all this trouble is down to the Amoco bit - standing for Am... Oil Co.
Am for amateur perhaps?.
arkleseizure,
I'm no great fan of BP but I do not think that comment from the link you posted is likely to be based on much fact. Is it referring to a production platform.
It's incomprehensible that BP would be foolish enough to continue to operate another rig in similar circumstances without a complete review of safety and operational details.
As I understand it Tony Haywood had actually made significant strides in improving the safety culture at BP - it seems a shame that he's become a hate-figure. He can hardly be personally responsible for this disaster - there are hundreds of people or possibly thousands who are involved in drilling wells from several different companies.
B.
What if Obama decides to order BP to shut in all US production pending a safety audit?, the following excerpt appears to suggest this course. Hopefully the Obama administration doesn't take 'nudges' from RollingStone as it does from the 'Center for American Progress' (a Soros vehicle - Petrobras being his second largest holding and in need of deepwater rigs - now available- for Tupi and Carioca).
http://www.rollingstone.com/politics/news/17390/111965?RS_show_page=0
Most troubling of all, the government has allowed BP to continue deep-sea production at its Atlantis rig – one of the world's largest oil platforms. Capable of drawing 200,000 barrels a day from the seafloor, Atlantis is located only 150 miles off the coast of Louisiana, in waters nearly 2,000 feet deeper than BP drilled at Deepwater Horizon. According to congressional documents, the platform lacks required engineering certification for as much as 90 percent of its subsea components – a flaw that internal BP documents reveal could lead to "catastrophic" errors. In a May 19th letter to Salazar, 26 congressmen called for the rig to be shut down immediately. "We are very concerned," they wrote, "that the tragedy at Deepwater Horizon could foreshadow an accident at BP Atlantis."
Tim Dickinson blogs about all the news that fits, from the Beltway and beyond on the National Affairs blog.
The administration's response to the looming threat? According to an e-mail to a congressional aide from a staff member at MMS, the agency has had "zero contact" with Atlantis about its safety risks since the Deepwater rig went down.
Well, the BP board hasn't stood up to Obama, has it? I think Hayward is a decent guy doing an impossible job.
The chairman is a joke - sounds like Arnie in Terminator 2 and his 'small people' comment simply reinforces the perception of arrogant Europeans so adding complete lack of understanding of the US to his lack of understanding of the oil & gas business!
The board has been absent without leave. Seems like we the owners have a lot of highly paid non-exec help, quite a lot of it American, who have simply rolled over when Obama sounded tough. Apart from our politicians, the two most supportive Brits have been Richard Branson and Alan Sugar (Helen Mirren should stay in the US permanently; she's like Jane Fonda during the Vietnam war!).
What leverage do we the owners have to replace the board with a new chairman and some non-execs who care about the company?
Is it possible to get an Extraordinary General Meeting called to pitch this lot out? I guess this would have to be led by the big institutional investors?
BP was down almost 10%, looks like I was right.
http://www.thisismoney.co.uk/news/article.html?in_article_id=506155
Too damn right imv.
It isn't BP that has put all these oil rig workers & suppliers out of work - it is Obama and his administration who have. It was they that decided to stop all deep water drilling, not BP. Ergo it is the US administration's decision that resulted in these job losses so they shouldn't expect BP to pay whatsoever.
And still we have SOLE focus on BP, nothing on Andarko or Mitsui, zip on Transocean.
I hope Cameron was diplomatic but firm on the outrageous focus Obama has placed on a company that has only leased both the rig,and its services from Transocean - it is surely the latter who is primarily at fault.It's their rig, their workforce,their screwup.
All kudos to BP frankly for their numerous attempts to solve this, the amount of money they are spending attempting to resolve an environmental catastrophe not of their own making, and their offer to pay all legitimate business losses(So sorry, if you can't supply detailed accounts legitimising your claim why should you expect full recompense)
The problem is with the toxic dispersant they use. They do this to hide the amount of oil on the surface to pay less fines. Researches have found massive toxic oil plumes that kill marine life in their path because they create low oxygen levels.
Hardly - the measure of toxicity is always a function of concentration. Using dispersants allows the toxic substance to be spread over a much larger volume making it more dilute, hence significantly less toxic to anything that encounters it. The use of dispersants will have the added benefit that it will allow it to be broken down by natural biodegradation faster.
Unfortunately, as you imply, this biodegradation has the unfortunate effect of using up oxygen in the volume of water it occurs in, potentially causing a 'dead zone' of de-oxygenated water to occur. This should be less likely if there's strong enough currents in the area to disperse the water, but I don't know enough about Gulf water flow to comment.
There is the question, however, of what would you suggest they do instead? There is the suggestion of the other dispersant in that article - however as it goes on to comment, the dispersant chosen has been proven to be effective before in previous spills. I wouldn't be too concerned about the levels of toxicity between the two options - LD50s are prone to be vastly different between species anyway, and there will be such a small quantity in comparison to the volumes of i) oil and ii) ocean that I'd have thought that anything that came into contact with a significant concentration of dispersant would have already suffered a more far bigger dose of harmful crude. If the toxicity difference between the two options were measured in orders of magnitude I'd be concerned, but 3x difference will not make any significant impact.
The other option of not using dispersants at all would result in a much higher chance of crude reaching the coast. Once this happens it will be a lot harder to clear and will take a lot longer to degrade.
As a lot of posters have commented elsewhere, BP are pretty much doing all they can to handle the spill. It is a tragedy to all involved, certainly, but this type of hysterical wailing doesn't help solve anything.
Yes, the US is the UK's greatest ally and vice versa...but Obama is not our friend. For some reason, he is anti-British and for a host of reasons, it seems anti-capitalist too.
Back to the history books.
The quote, "BP is destroying America" is from BP causing the worst environmental disaster in US history.
Let's try the Lakeview gusher:
The Lakeview Gusher Number One is regarded as the largest recorded U.S. oil well gusher.
Facts
- It began on 14 March 1910
- It was finally brought under control in September 1911, i.e. 18 months later
- Spill estimated at 9,000,000 barrels
- Initial flow 18,800 bopd, peaking at 90,000 bopd
So does Appleman22 really think that it will take over 18 months to plug this well?
http://en.wikipedia.org/wiki/Lakeview_Gusher
Nothing I said was anti-British, the UK is America's greatest ally. I respect your opinions if you believe BP stock price will go up, its pointless to try personal attacks over the internet. I will source everything I said and if anyone has any questions on the facts please let me know.
The quote, "BP is destroying America" is from BP causing the worst environmental disaster in US history. If you do the research its not just the spill, actually the spill isn't the worst part. The problem is with the toxic dispersant they use. They do this to hide the amount of oil on the surface to pay less fines. Researches have found massive toxic oil plumes that kill marine life in their path because they create low oxygen levels.
BP Stock Price & Liability:
http://www.marketwatch.com/story/bps-market-value-halves-as-spill-costs-loom-large-2010-06-09?dist=afterbell
Oil Dispersant:
http://www.protecttheocean.com/gulf-oil-spill-bp/
Oil Plume:
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article7148494.ece
http://www.waltonsun.com/news/plume-84568-newsherald-miles-south.html
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/28/AR2010052802346.html
http://news.yahoo.com/s/ap/20100528/ap_on_re_us/us_oil_spill_new_plume
http://www.cnn.com/2010/US/06/07/gulf.oil.plume/index.html
http://www.upi.com/Top_News/US/2010/06/07/Scientists-find-evidence-of-2nd-oil-plume/UPI-57811275916269/
Dear Appleman22,
I'm very sorry to say that your comments are the worst researched that I've come accross on BP.
Can you explain to me how BP is destroying America? Can you explain how BP's response is worse than the American company Union Carbide's response in Bhopal.
Regards, Xig
This is probably one of the worst articles ever (other than a pro-Hitler article). BP is destroying America and their view is that Fund Managers and large institutions should support the company. Once the full story comes out about BP using toxins in the ocean to cover up how much oil is really being spilled, there will be a massive consumer push against the company. I would not be surprised if BP paid for this article, its not even good advice to invest in a company that has an seemingly endless liability. If you own BP, SELL. If you don't, SHORT BP.
AppleMan22,
Are you, perchance, a native of the North American colonies, or maybe one of the later states? ;-)
Laughable response Appleman... "BP is destroying America". America is destroying itself with it's unquenchable thirst for oil and BP is the messenger and thus the scapegoat. Accidents happen, and this one is an almighty cockup by both the Brits but the American hired hands, but the focus should be on cleaning up and what can be learned, not throwing anti-British, anti-BP diatribes around.
I have to admit though that I'm appalled that the owners of the company haven't stood up for the fight at all. Pension fund managers and hedge fund managers across the board own BP, and it's one of the great sadnesses of institutional ownership that shareholding becomes so fragmented. Hayward is the manager, not the owner. I'd rather see some people with a greater stake in the company weigh in and get together for the fight, but it seems these days they are all too concerned with quarterly returns and don't want to admit in their next publication that they are still holding BP.