Wednesday, June 9, 2010

BP (NYSE:BP) Bankruptcy and Stock Trading

Many are concerned that BP (NYSE:BP) will file for bankruptcy and that their stock trading will continue to fall. Even though BP seems to have a we can handle it all attitude, they will eventually run out of money. With them putting out such large amounts for things like television ads to the tune of $50 million dollars, it makes you wonder how they are planning to continue on at this pace financially. Not to mention, they haven't even been successful in their fuel spill containment efforts or even scratched the surface of beginning to clean up this catastrophe.

There is also much speculation that BP is getting ready to cut their dividends in order to be able to pay for the Gulf oil cleanup. This sent BP shares plummeting below 400 pence today. At the end of the day trading, BP was down 4.2 percent at 391.5 pence. Before the hazardous spill BP was at 648 pence.

"Consumer borrowing unexpectedly rose in April but fell in March, suggesting Americans aren't too comfortable with their finances despite the economic recovery. The Federal Reserve on Monday said consumer credit outstanding increased at a seasonally adjusted annual rate of 0.5 % up $954.8 million to 2,440 trillion. Economists surveyed by Dow Jones News wires had for cast a $1.0 billion decline in consumer credit during April. But the surprise gain came with a revision to March, when borrowing fell $5.4 billion or 2.7 %, originally it was estimated rising by $2.0 billion," reports Jeff Bater and Meena Thiruvengadam.


  1. $50 million on adds is a drop in the oil bucket, i do not own BP, but did and made a profit, hippy

  2. Agreed, it is ridiculous for people to tell BP to spend their own money. They make 6 billion a quarter people. Give me a break...

  3. The company makes $7.5B per QUARTER in profit. That's $30B per year. BP is not going to go broke because of this spill, unless it's absolutely monstrously bigger than we think it is. Furthermore, they can tack on $20B in borrowing to their balance sheet without batting an eye.

    In all honesty, I doubt they'd have to cut their dividend if it weren't for the political beating they're getting right now. In a year's time the market will have forgotten and forgiven and anyone buying now will be jumping for joy.

  4. This is one of the worst analyses I have ever seen... what the hell is this BS doing on the google finance news list?

    Whoever wrote this article is horrendously misinformed, and evidently a complete "armchair trader".

    50M is an amount to be sneezed at... BP makes 100M every 24 hours.

    You write "BP will eventually run out of money" - You clearly have no idea about how the time value of money works. Please go and read about discounted cash flow valuation and free cash flow analysis- these two things will stand you in good stead to PROPERLY analyse a company.


    So what is likely to happen?

    BP will remain in some form or another. A takeover bid is highly likely at this stage given the massive discount BP represents. Trading at 5.3 P/E and 1:1 NAV is a tremendous discount for an oil major!

    The risk comes in regulation... will Obama try and "kick ass" (hmm great 'Presidential' language there). The worst foreseeable situation is that Obama attempts to levy a ridiculous damages charge of something like 30bn USD. In that event, BP would stick their middle finger up at the US government and walk away from the US. They would cease all US operations, ceding 35% of net assets (and huge current liabilities), which would have a bottom line impact of 11% per annum loss of EBIT profit (check latest financial statement).

    The maximum potential cost of this oil spill is about 1 year's free cash flow profits (20bn USD @ 70 usd per barrel), plus 10bn in additional debt issuance. It's highly likely that the damages will be spread over 5-10 years, allowing BP to pay it off slowly, compensated by the higher oil prices to come.

    BP represents a 20% safe discount, and a 50% likely discount. The safe discount assumption works on the principle that the US would seize all BP's US assets (an unprecedented move that would be a shameful response to an accidental error by BP). The 50% likely discount assumes that the US will not go all USSR on BP's ass, and that though it will cause some modicum of pain for BP, said pain would be easily borne out by its future cash flows.


    Dripping Oil's author... take note, THAT is how you analyse a financial situation.

  5. To say BP is going to go bankrupt is like saying the world ends tomorrow. As previous posters have said BP makes 7.5b per quarter profited over $16 billion last year with OIL in the dump. Pull your head out of your arse... I've been short BP from $45 and covered that short position today I now own BP stock with a cost average below $15 this stock will make me wealthier than I have ever been over the next 3 years.

  6. Is any body counting on the legal lawsuits coming?? From hotels to restaurants to dry cleaners every body is going to sue BP. They publicly accepted the fault that means they are liable for any business loss from any body that does work in the golf area. Even if BP does not loose all the lawsuits as soon as people started many multi-billion dollar lawsuits think what will happen to BP stock. And some people will just short BP and file multi-billion dollar lawsuits.
    I see BP stock trading under $20 shortly.

  7. Dude you are awesome. Great SEO work to get google to recognize this as a real news source. I'llpaypal ya 1k to tell me your trick, hit me up.

  8. While BP wouldn't go bankrupt under normal conditions, there seems to be a dark motivation behind the rhetoric of the Whitehouse. It feels like they are trying to push BP to the brink of financial collapse. Why? god knows, maybe for national oil industry interests. The problem is all oil companies are truly multinational in ownership. Destroying BP would achieve little but heighten the probability of a second global meltdown. BP seem to have been pretty open about this disaster. Why Obama won't meet with BP is very strange. Yes its a terrible thing but why don't you work together on trying to sort it. I don't get it. No one is gonna win if BP dies.

  9. I have never seen the media and ignorant people so desperate to bring down the economy.

    Everybody is so focussed on the spill and why is the fixed not getting done, trashing BP with all they got.

    But let's do the numbers. Here's the major holders without counting the top bond holders...
    WELLINGTON MANAGEMENT COMPANY, LLP 34,841,626 1.11 $1,988,411,595 31-Mar-10
    BARROW, HANLEY MEWHINNEY & STRAUSS, INC. 16,700,677 .53 $953,107,636 31-Mar-10
    BANK OF AMERICA CORPORATION 13,911,165 .44 $793,910,186 31-Mar-10
    STATE FARM MUTUAL AUTOMOBILE INSURANCE CO 13,052,048 .42 $744,880,379 31-Mar-10
    PRICE (T.ROWE) ASSOCIATES INC 12,442,139 .40 $710,072,872 31-Mar-10
    MORGAN STANLEY 11,224,852 .36 $640,602,303 31-Mar-10
    FMR LLC 7,854,986 .25 $448,284,051 31-Mar-10
    WELLS FARGO & COMPANY 7,768,541 .25 $443,350,634 31-Mar-10
    Tradewinds Global Investors, LLC 7,436,248 .24 $424,386,673 31-Mar-10
    GATES (BILL & MELINDA) FOUNDATION 7,133,000 .23 $407,080,310 31-Mar-10

    Bring down BP and the dominos will fall into place giving way to a real depression worst that you've ever read in your history books.

    Keep at it Deb!

  10. Bankruptcy is about as uncertain as the amount of oil flowing from that wellhead. But it is a card in the deck of thhe possibilities...

  11. My God Deborah, you are one of the stupidesteffers ever if you seriously believe BP cannot pay for its $50m ad expense. You are also stupid if you believe anything else you wrote.

    However, as Cytranic said, you are an absolute genius if you are shorting BP stock and found a way to get you pathetic analysis onto the google newsboard.

    I willalso pay you $1k to hit me up with your trick.

    I don't know what to think about you, genius or idiot.

  12. There are very dark forces working against the interest of BP and they all come from the Cheney, Rumsfield and Bush mafia. It has always been abt markets and oil.

  13. BP die? I really don't think so. This company has all types of strange fans in it's repertoire of people to call on in troubled times. Just look at the volume. Everytime someone sells. They buy. We sell. They buy. Notice, they never buy unless someone sells. Who are they?

  14. When all this is over and BP somehow survives. I would invest into them because it would bring a great return. I could make way more than 1000% on the returns. But the only problem is that you never know if they are going to stay in business from this

  15. Its truly ashame that the BP deep horizon well could not, on day one, be made into a viable, prolific hight-producing well - 25000 barrels a day times $70 barrel = $1,750,000 per day, $638,750,000 per year. I not sure that still couldn't be done, if only BP knew what the heck they were doing.

  16. I agree with you Stevie Austin.... Either Deb is a genius or idiot..

    I sure hope she has been shorting this stock, if she has... damn is she making a killing!!!

    This is the lowest BP stock has ever been since 1996... That is 15 years ago! Since 2004 till 2008 BP has been around $70 a share and up until before this news hit, it was in the high 50's to low 60's...

    Give it a year and BP stock will be back at $60+ a share while all the fools who sold it now will be crying...

    Keep posting this BS news so the stock keeps going down and we can keep buying the stock at huge DISCOUNTS... ;)

  17. FFS Google finance stop publishing blogspot posts!!

  18. This is not news. This does not belong on Google Financial.

  19. I really think this blog is more about hoping for Google Ad revenue than reporting anything terribly important regarding BP and/or investing.

    BP has rather vast resource and cash-flow as commenters have mentioned here. It is, and will probably further, be oversold. There is likely to be great buying opportunity. Personally, I though that a huge stock-price dip could be a great opportunity for BP to go private. What better time to buy back all of your outstanding stock at a huge discount?

    Sure, the desire to demonize BP (whether directed by government officials or the media, etc) could seriously destabilize BP by increasing financial pressures on them. But, they have great production and refining resources that are churning out profits daily. Those profits are going to be needed to pay for damages. But, there will be an end to it, eventually... unless the government decides to treat them incredibly different than what Exxon went through (and, Exxon is NOW a nearly $300 billion entity! They recovered; so can BP)

    Only time will tell what happens with BP. But, there are many other non-bankruptcy options that will likely win out. Oh - I do think the $50mm on ads was ridiculous, though not large in the scheme of things - because the ads were only bound to generate further negative press. BP should have perhaps waited until the flow is stopped to do the ads, or at least change the content to be more apologetic and just deliver facts about the spill and their attempts to fix the leak.

  20. Further, using the Gregorian Calendar, in this dimension of reality anyway, March comes before April. I find your last paragraph to be confusing, irrelevant to the article, and not particularly supportive of your assertions.

  21. Exxon Valdez oil is still not cleaned up. Do you really think that BP will do any better?

  22. One more thing, you need to get your facts straight lady, how many times did you edit?

    The first time I read it, it show that BP closed at what? 39.98? Now you deleted that part?

    What else are you going to edit?

    BP cannot go down, if it does, we are looking at another bail out. Think about it. 80,000 employees world wide, pension funds, the chunks of the wealthiest and most powerful people on the line.

    Not gonna happen.

  23. All of you who think BP can survive this have lost your minds!! Have you considered the fact that every beach front property owner from Texas to Florida will sue the company? That doesn't include the businesses, hotels or fisherman. Yes, BP has huge cash flow, assets and even capital but the cost of this catastrophe by the end will be so astronomical that the company will not survive the cost, will most likely end bankrupt and Obama and his head hunters will end up funding the long term clean up of this mess!!!! It took nearly 10 years to clean up the 1989 Exxon spill and that was nothing compared to this.

    A single hurricane in this area will very likely spread the oil into the gulf stream. The most horrifying part of this is not the financial impact but the environmental impact that will result from the oil.

  24. Ah, one extreme of the fear-greed spectrum at work. I love all the fear driving this stock lower. Maybe I'll retire earlier than I had planned. Or, am I being greedy?

  25. Well I've been buying, trying to catch the falling knife, and am in the red now, but I can't fathom that the stock won't recover. I doubt this will cost BP more than $10B, but even $30B wouldn't justify the current price, unless crude drops to $35 / bbl.

  26. Why Google Finance can considers a Blog post as a news on their website?

  27. From everything that I've read, estimates of the damage are between $10 and $50 billion. While there is plenty of fear going around(just look at how many people are dumping this stock, and how low the price has gotten), I personally feel this fear is unfounded and have picked up a little bit of BP myself.

  28. I know plenty of people staying away from BP pumps. I drove by yesterday there wasn't a sole in there store yet the next was packed. Sooner or later they will run out of money. Why lawsuits, image, clean-up, and continued piddle-f@$%&ing around with sealing the leak.

  29. anyone who shorted this stock yesterday will be biting their collective fingure nails. 10% rally on the pre markets. so who blinks first the complete f heads here or the really serious investors buying

  30. The Florida toursim economy is projected at almost 60 billion dollars per year. Yes, BP can and WILL go into receivership depending on the demonstrable damage to the Florida tourism economy.

  31. Florida tourism economy ?! That includes disney land and theme parks etc,. will disney be suing BP ? Get real.

    According to the lawyer who successfully sued ExxonMobil (although it took him 21 years) the oil spill law states that only properties who have oil on their beach can sue, businesses that depend on the beach but are say 2 streets back from the shore, cannot sue. those companies just have to suck it up.

    BP cannot and will not go BK. BP have got great lawyers and will take this through the courts forever. meanwhile, the other 2199 oil wells they have in the US will continue printing money, not to mention all their other oil wells around the world.

  32. What would Buffett say? ... I say put your money where your mouth is. I don't think anyone posting on this sight will put any money on BP in the forseable future because there is more troubles to come. The oil is still leaking and this event believe it or not is bigger than Katrina.

  33. Well i've just gone in big.

    Lets put this into perspective.

    1. BP prints money in the form of oil: Clearing $50 mil/day on last results.

    2. They have 230+ Bil in Assets - that's 12x Apple.

    3. Katrina cost 25bn in insured losses. No way this gonna will cost that, even if it is in the most litigious country on earth. Katrina devastated everything in its path, the size of a small country.

    I say buy. now.

  34. of course BP isn't going away. that's ridiculous

  35. Hey moron! Do you actually think your half baked "analysis" would drive the stock lower so you could scoop up more??? First, you have to become legitimate and trusted before you can do that kind of stuff you dolt!

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