Friday, June 25, 2010

BP (NYSE:BP) Bankruptcy and Increasing Focus on Anadarko (NYSE:APC) and Mitsui (Nasdaq:MITSY)

Over the last week or so, there's been an increasing focus on BP's (NYSE:BP) partners in the leaking oil well: Anadarko Petroleum (NYSE:APC) and Mitsui Oil (Nasdaq:MITSY).

At the outset it looks like it's a nod toward fairness and sharing the costs in the project, but so many things have been admitted by BP, that it's questionable as to whether or not the two companies could be made to contribute.

Lawmakers of course know this. So why the new interest in them? It's the growing awareness that the mounting costs related to the spill could bring BP to its knees and force them to declare bankruptcy to protect itself from creditors and liabilities.

If BP is forced to go bankrupt, there is no one else left to pay, and if government officials attempted to push that on taxpayers, their already tenuous political futures would be in even more jeopardy. It isn't going to happen!

Even though this is a genuine disaster, there was too much political posturing in response to outrage over the situation, and in attempts to appease the people. Things were put into place too quickly without thinking it through clearly and thoroughly.

What that essentially means is it's all on BP, and the issue of payment and liability is completely on them alone. Although there are ancillary lawsuits the other companies will face, it isn't near the liability faced by BP.

The other problem is BP is the only one out of the three with the type of capital and insurance to handle the lawsuits and claims; or at least with a legitimate shot at it.

Concerning the $20 billion escrow fund, some politicians are looking at the four-year length of it, and are aware BP could end up not having enough to pay out into it over that period of time. That's where the interest in Anadarko and Mitsui come in.

Then take the liability of BP with the Clean Water Act, which if they are deemed as being grossly negligent in the accident, could pay as much as $4,300 a barrel of oil that's emptied into the Gulf.

Depending on that outcome, and also finding out what the actual amount of oil that has escaped into the Gulf is, the costs would be astronomical, with the potential to come in at $142 million a day. How long could BP handle that on top of all its other liabilities? They couldn't is the answer.

Whether people like it or not, if all they try to do is destroy this company, and if any type of lawsuit is allowed to go forward against them, it is highly unlikely they'll continue going on without going bankrupt.

Even adding the two co-owner oil companies to the liability list won't help much, as what they could pay would be a relative drop in the bucket in contrast to BP.

Like it or not, this is another one of those too big to fail moments, which no one has the guts to say concerning the disaster.

Unfortunately, it is the legitimate pursuit of BP in the circumstances which is bringing it all about, and laws which will penalize them beyond what any company could probably pay. All this and we've barely scratched the surface of overall liabilities, although we've touched on the larger ones.

Bottom line as the growing costs are revealed, are there is no way this company will be able to survive without going bankrupt, unless there are actions taken to alleviate their liability, which isn't going to happen, as it would be political suicide.

It looks like taxpayers will end up paying for some of this, as there is simply no way BP will be able to.

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