Wednesday, June 09, 2010

Is BP Pre-Disastered?

image:: screencap of BP financials from Google Finance

While it may seem the global whipping boy BP is swirling the commode of public opinion, I can't help but wonder how much of their recent stock price plummeting is fueled not by a "rational" analysis of the company, but by emotional factors and an unfettered PR fail on the part of the firm and its CEO, Tony Hayward. 

The reality of the situation is that BP has been doing quite well financially with "successes" in other areas and in the first quarter of 2010 enjoyed $6.079B in net income. Even if the Obama administration puts BP squarely on the hook for cleanup costs and damages, which in the past have tended to be mere slaps on the wrist, the payouts won't be for years and would likely be a drop in the bucket for the behemoth corporation—and they know it. There is uncertainty with respect to whether the fallout from the Deepwater Horizon disaster will be a game-changer in terms of industry regulation. Moreover, conventional wisdom states to stay away from companies where another party has claim to their assets, which includes lawsuits from the government. Call me jaded, but I'm not seeing it, unless the Obama Administration and Congress step up an anti-corporate agenda. I might be wrong. While Exxon got away light penalties, the political zeitgeist is more convoluted these days than in the early 90s. I think it's hard for "drill, baby, drill" to get traction, but the sentiments behind it by many haven't gone away.

While the stock price plummets and dividend policy is the subject of speculation, I'm wondering if BP stock is now "pre-disastered" à la Irving's The World According to Garp::

In the same vein of fast food or food manufacturing e-coli disasters, some would argue that after such a disaster, those involved are the safest. The disaster effecting swift and radical changes to address the situation. So, environmentally and in terms of being a corporate good citizen, I wonder if the same would hold true for BP. I feel this is related to their financials, over time {I suspect the stock will bottom out soon and will be looking at some numbers to create an estimate}, given that what's driving the plummet is perceptions of the firm, not "economics". Sticking it out with Hayward might be a tough sell in the wake of what's been done {or lack thereof} and said, given that Obama himself think he should resign. Which, ironically, would assure him of "getting his life back."

Song:: Kathryn Williams-'I Started a Joke'

Twitterversion:: [blog] In wake of Gulf Oil spill disaster & Tony Hayward PR #fail, is BP "pre-disastered" financially & environmentally? @Prof_K

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