Opinion

Felix Salmon

Buying BP

By Felix Salmon
June 1, 2010
BP | oil

Did the markets really think the top kill was going to work? Evidently so — BP shares fell 15% today, to $36.52. But before we declare this the end of BP, let’s put this in perspective: the shares traded as low as $34.06 in March 2009. And over the last three years, BP is down 46%, compared to 30% for the S&P 500 (and Exxon Mobil) and 93% for Citigroup.

The most likely fate for BP at this point isn’t death but rather takeover. There’s been a lot of speculation along those lines, and with BP’s leadership looking even weaker than its stock price, the rest of Big Oil is surely salivating at the prospect of picking BP up without much difficulty.

What’s more, BP could easily be broken up, like ABN Amro, and divvied up according to its various geographical units. Here’s what the analysts at Norwegian financial group DnB NOR are thinking:

If several companies were to bid on BP – on a combined basis – Exxon, Royal Dutch Shell, Total and Statoil would fit well together. Then more companies could split the risk of the final massive oil spill bill.

My guess is that this kind of a disappearance into the footnotes of oil history is now the base-case scenario, and the main thing supporting the BP share price. The Deepwater Horizon catastrophe might well spell the end of BP as an independent company, and it’s unspeakably tragic for hundreds of thousands of families in the Gulf. But it might just represent the opportunity that ambitious oil executives in other companies have long dreamed of — and I doubt that BP shareholders, scared as they are of billions of dollars in possible costs and fines, would put up much of a fight.

Comments
9 comments so far | RSS Comments RSS

Nice article. I’ve put on my blog and made a small image for this.

Heiland Stark
heilandstark.wordpress.com

Posted by HeilandStark | Report as abusive
 

Screw Exxon etc.

If the fine amount is at all proportionate to the damage caused, BP ought to just hand over their keys to the American taxpayer, lock stock and barrel. Of course, all the other impacted Gulf countries might want executive washroom access as well.

Posted by HBC | Report as abusive
 

could we please get this Storyburn a**hole banned from commenting

Posted by johnhhaskell | Report as abusive
 

And for all of the BP employee’s who would be out of a job if the company is broken up/sold off/taken over? What of their fates? Many of them have nothing to do with this issue yet everyone is keen to sacrifice thousands of innocent workers jobs for the sake of ‘moral satisfaction’ (read that as revenge) for an organisation that powers your entire lives.

Let them who is not in a better place for hydrocarbons cast the first rock.

Posted by PassingResident | Report as abusive
 

I just backed the truck up this afternoon and loaded up on BP shares. Woohoo!

This is a company that has a market cap of only $114 billion on annual revenue of $265 billion.

The only thing gushing faster than Macondo is BP’s revenues. The world is thirstily drinking up every drop of oil that BP doesn’t dump into the gulf. It is touching how Obama and his massive entourage power into the gulf to speechify on huge quantities of the product that BP produces.

Anybody want to take bets on when Air Force One switches to solar power?

Posted by DanHess | Report as abusive
 

Good idea, John. I’ve sent an email saying that comments are fine, but I’m not going to put up with any more ads.

 

Oh, the email bounced. OK, time to start marking the ads as spam.

 

I can’t see too many BP employees losing jobs in the gulf. Whoever takes over will have to drill and build an oil well and employ people to gather oil from the well. BP management will certainly lose jobs due to redundancy but unlikely that too many of those will be from the gulf.

Posted by dicktracy150 | Report as abusive
 

Pot AND Kettle has everyone forgot what union carbide did at bhopal? BP should pay the £59 million max liability and walk away from its operation. The company must survive this unforseen accident.Not one more British company to go into foreign hands.especially as America caused the Global crash with lehmans and the pyrimid scheme of all time.

Posted by ukman | Report as abusive
 

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