BP’s spill costs look man­age­able eight months later

The Pak Banker - - I Nternational -

NEW YORK: As the Gulf oil spill gushed out of con­trol, BP's fi­nan­cial li­a­bil­i­ties seemed big enough to sink the com­pany. No more.

Cleanup, govern­ment fines, law­suits, le­gal fees and dam­age claims will likely ex­ceed the $40 bil­lion that BP has pub­licly es­ti­mated, ac­cord­ing to an As­so­ci­ated Press anal­y­sis. But they'll be far be­low the high­est es­ti­mates made over the sum­mer by le­gal ex­perts and prom­i­nent Wall Street banks, such as Gold­man Sachs, which said costs could near $200 bil­lion.

BP will sur­vive the worst oil spill in U.S. his­tory for sev­eral key rea­sons: it has lit­tle debt; its global busi­nesses are fore­cast to gen­er­ate $26 bil­lion next year in cash flow from op­er­a­tions; the en­vi­ron­men­tal im­pact of the spill isn't as bad as feared; and the govern­ment seems un­likely to ban BP from Gulf drilling. To bol­ster its fi­nances, BP has cut its div­i­dend, is­sued debt and sold more than $21 bil­lion in as­sets.

"It could have been a lot worse," says Tyler Priest, a Uni­ver­sity of Hous­ton petroleum his­to­rian who serves on Pres­i­dent Obama's oil spill in­ves­ti­ga­tion com­mit­tee. "BP is go­ing to come back from this."

Many in­flu­en­tial in­vestors ap­pear to agree. Ac­cord­ing to Thom­son Reuters, 23 firms with $1 bil­lion or more in­vested in the stock mar­ket, in­clud­ing Black­Rock In­vest­ment Man­age­ment, Man­aged Ac­count Ad­vi­sors and Ry­dex Se­cu­rity Global In­vestors, more than dou­bled their hold­ings of BP stock from July through Septem­ber.

At $44.11, BP's stock price has risen 63 per­cent from its low of $27.02 on June 25. It's still down 27 per­cent from its close of $60.48 on April 20, the day of the spill. The well was capped on July 15. The AP anal­y­sis shows the com­pany is likely to face $38 bil­lion to $60 bil­lion in spill-re­lated costs. -Ap

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