End in sight, but only if company’s calculations are on the money
0 Comments | Evening Standard; London (UK), Jul 27, 2010 | by Chris Blackhurst
IT seems daft heaving a sigh of relief when a company has just posted a Pounds 11 billion loss, put aside Pounds 20 billion to cover the cost of the worst environmental disaster in US history, and bid farewell to the chief executive. But that is the reaction in the City today at BP’s quarterly results and confirmation that Tony Hayward is going.
The key aspect is that BP believes it will not be found to have been grossly negligent in the Gulf of Mexico tragedy. That being the case, it has put a cap on the final bill for the clean-up, compensation and any litigation, of $32.2 billion (Pounds 20 billion). Given BP’s record in dealing with the fall-out from the explosion that cost 11 lives and led to the mighty spillage, that conclusion must come with a giant caveat attached.
It’s what BP says — not, crucially, the US prosecutors. If they determine the company was to blame then the cost could greatly exceed Pounds 20 billion. But BP say they’re confident that won’t happen.
Staff and shareholders (many of whom are British pensioners who hold shares via their pension schemes) must be praying they’re right. Because it’s hard to see how the firm could ride out such a finding of culpability.
The financial damage plus the harm to its already battered reputation would be too great to bear. In that scenario, bankruptcy protection followed by takeover looms large. That’s not where we are today: the company is signalling that if anyone is deemed to have acted negligently it will be the rig’s operators, who were contracted by BP, and not BP. With American Bob Dudley arriving as chief executive, there is a clear sense of BP hoping a line can be drawn.
The other clear message is that Gulf of Mexico apart, BP is performing extremely well — and would have produced a healthy set of profits
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