Wednesday, June 9, 2010

British Petroleum: A Month From Chapter 11? (BP)

"BP Panic: Relax, Firm Can Cover the Clean-up" (It's the lawsuits that might do 'em in) BP

Original post:
The stock is down 15.80% at $29.20 after trading as low as $29.01.*
From Barron's 'Stocks to Watch Today' blog:
Shares of BP (BP) are off $4.20, or 12%, at $30.50, extending rather dramatically their slide from the late morning, apparently prompted by some pretty harsh views expressed by energy investor Matt Simmons of boutique investment house Simmons & Co.
Simmons, who wrote a book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, tells Fortune’s Nin-Hai Tseng today that the Gulf of Mexico spill could get much worse. “There’s a lake at the bottom of the Gulf of Mexico that’s over 100 miles wide and at least 400 to 500 feet deep of black oil,” says Simmons, and a hurricane could cause that lake of to “paint the Gulf Coast black.”
Simmons thinks BP’s a step away from insolvency:
They have about a month before they declare Chapter 11. They’re going to run out of cash from lawsuits, cleanup and other expenses. One really smart thing that Obama did was about three weeks ago he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup. But there isn’t enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this my guess is that they’ll panic and go into Chapter 11.
Tiernan Ray goes on to explain his disbelief.
From Fortune's Street Sweep blog:
BP: Bankrupt Petroleum?
The fear that the gulf oil spill will force BP into bankruptcy swept the markets Wednesday afternoon.
BP (BP) shares plunged 15% in frenetic trading -- eight times the oil company's average daily volume -- amid speculation that a bankruptcy filing is at hand.

Death spiral?
The cost of insuring against a default on BP debt surged 48% to a new high, CMA said. It now costs $382,000 annually to insure $10 million worth of BP debt against a default for five years. That's more than triple the going rate last month.
One oft-cited driver of Wednesday's action was an interview by Fortune's Nin-Hai Tseng of oil guru Matt Simmons, who said he believed the company would be bankrupt in a month as it faces mounting cleanup costs and legal exposure....MORE
*From Climateer Investing (May 27):

"Trading on the ‘Top Kill’: Analyst Thoughts" (BP; RIG)
The stock is up $2.75 at $45.16 and I wouldn't touch it with your money. Fiduciary blah blah, Prudent Man, raw terror etc....
See also:
"Years of Internal BP Probes Warned That Neglect Could Lead to Accidents" (BP) 
"Imagining the Worst in BP’s Future" 
British Petroleum Patents Blowout Preventer Testing Method and Makes no Promises on Dividends (BP)"
BP’s would-be takeover scenarios" (BP; PTR; RDS.A; XOM)
J.P. Morgan Comments on British Petroleum (BP) 
British Petroleum Stock Spanked on 'Top Kill' Failure. Arbuthnot Securities Questions Survival (BP)