(BP poll story updated for BP cap oil spill cleanup, analyst reaction)
NEW YORK (
) -- The BP oil spill hit an absurd high note in the past week when a British bookmaker began taking bets on whether
CEO Tony Hayward would keep his job,
on which endangered Gulf of Mexico species would go extinct first as a result of the environmental impact of the BP oil spill.
Indeed, it has been a time of existential questions for BP CEO Hayward (who infamously said that he "wanted his life back"); for the Kemp Ridley Sea Turtle (number one on the list of species likely to go extinct thanks to BP, according to British bookmakers); and in the life of BP as a company.
The past week in the life of BP began with the failure of the "top kill" and ended with some sign of success as BP donned the "top hat" and actually began siphoning off a small portion of the oil leaking into the Gulf of Mexico -- by Monday, the BP cap was siphoning off more than 20,000 barrels of oil per day, and BP's most optimistic claim was that once it perfects the cap technology, it will be able to capture as much as 90% of the oil leaking into the Gulf of Mexico.
The top kill's failure, though, meant that the best BP could hope for until relief wells are finished in August is to contain, as opposed to stop, the oil spill.
The fact that BP said it was now capturing as much as 20,000 barrels of oil per day raised the question of just how much oil was leaking into the Gulf of Mexico. The previous best estimate -- though all of the estimates have been viewed skeptically -- was as much as 19,000 barrels leaking daily. Therefore, if BP is now capturing more than 20,000 barrels of oil, yet the live video feed from 5,000 beneath the ocean's surface still shows plenty of crude seeping into the deep sea, how much more oil does BP have to capture?
Additionally, U.S. Coast Guard Rear Admiral Thad Allen conceded on Monday that regardless of the BP success in siphoning oil to the surface of the Gulf of Mexico, the BP oil spill cleanup will be measured in years, and not barrels per day that BP is currently capturing.
BP chief operating officer Doug Suttles said last Friday on national television, "I'd like to see us capture 90-plus percent of this flow." Yet what Suttles or, for that matter, any BP official would like has often been met with technical failure when it comes down to it, and much of the "90%" hope for the cap is premised on as-of-yet untested methods to improve the cap technology.
Even with the cap's increasing success, the rhetorical attacks on BP CEO Tony Hayward have reached their apex, with newspapers dubbing Hayward the "most hated man in America" and too many reports to count that Hayward would be out of a job by the time BP had finally extricated itself from the oil spill crisis.
Yet most notable for investors -- putting aside the attacks on BP CEO Hayward, and the low of the top kill failure followed by the recent high of the top hat's initial success -- the past week was also the apex of the most fundamental question of all: Can BP survive as a company?
One can almost imagine the deep-sea camera showing the constant pump of oil leaking into the Gulf of Mexico as a medical imaging machine monitoring BP's heart.
On Friday, BP CEO Hayward penned his first Op-Ed piece for the U.S. public, writing a mea culpa for the
Wall Street Journal
. Hayward and BP Chairman of the Board Carl-Henric Svandberg also held a highly anticipated conference call with investors, to calm the market fears that BP would not be able to keep paying its dividend and, at a larger level, that BP would not be able to cover all the costs associated with the oil spill.
Speculation that BP has become a takeover target, or at least would be forced to sell off prized assets like its stake in Prudhoe Bay, Alaska, have been rampant ever since the top kill failure.
On Monday, the Street and investors still were not convinced that BP had finally taken control of the oil spill cleanup. Credit Suisse put out a research note on Monday arguing that with the success of the cap, BP may have turned the corner in its oil spill effort.
Yet Goldman Sachs and Argus Research put out reports on Monday reflecting the extreme caution that many analysts and investors feel toward shares of BP, even after one-third of the company's market cap has been erased. Goldman dropped BP to a hold from a buy on Monday morning, saying that BP shares no longer represented any material upside to the larger energy sector due to the potential liability from the oil spill.
Argus Research analyst Phil Weiss put out a research note saying that even though the huge drop in BP's value might make it seem like a good short-term opportunity, there are too many uncertainties related to the oil spill to make any price target "buy" warranted at this time.
Standard & Poor's
downgraded BP long-term debt by a notch on Friday, and put BP long-term and short-term debt on credit watch for potential further downgrades. The S&P move merely followed BP downgrades already made by Fitch Ratings and Moody's Investor Service earlier in the week.
BP was non-committal on dividends in the conference call, but assured investors that it not only has enough cash on hand to financially manage the oil spill, but flexibility on the debt side of its balance sheet, too. BP also reminded investors that it has geared its balance sheet based on a $60 price for a barrel of oil, and even after the market selloff on Friday, oil was still above $71.
It didn't help dividend matters any when President Obama said on Friday afternoon that BP should not be "nickel and diming" Gulf Coast residents when it is paying out billions in dividends to investors.
BP ended the week with a daily decline of over 5% on Friday, but it may not have been the oil spill or the non-committal words on the investor conference call that led to another losing day for BP. For once, other big integrated oil companies were right there with BP, as a weak U.S. employment report and continued fears about the European debt crisis sent shares of
Royal Dutch Shell
down by a similar percentage.
Still, the big difference is that Total and Royal Dutch are not, at least from the headline perspective, fighting for their very survival. It was impossible to not be caught up in this week's episode of the new smash hit serial,
BP: Intensive Care Unit
, and it was a natural to ask readers of
this week: Can BP Survive?
The BP chart based on the response from
audience was more or less what an anxious investor in the waiting room might expect at this point: a mixed report.
Approximately 38% of survey takers described BP's existential crisis as just the latest panic, and said that it was in fact a good reason to buy BP shares. Yet BP shares didn't make much progress this week, opening at $37.34 -- more than $5 below the previous Friday's close -- and ending on Friday slightly below that Monday open, at $37.16.
It was notable in the survey results that even though the 38% of survey takers who think the BP existential crisis is overblown garnered the largest percentage of votes, it was far from an overall majority opinion.
In fact, not far behind, with 32% of the votes, were survey respondents who think that BP shares have not reached a floor value yet.
Another 12% of survey takers think BP will survive, but agreed that they would "put a containment dome over the stock."
That's 44% of the survey audience who don't want any part of BP shares, and can you blame them? BP shares may be the only thing currently more stained than Gulf of Mexico pelicans.
Oil Spill in Pictures
Only 8% of survey takers expect BP to be acquired, and that's not a surprising result. While there were reports as the past week progressed that BP might have to sell off individual assets in a worst-case scenario, it does seem like BP has the finances to keep itself afloat, at least in the foreseeable future. BP has $5 billion in cash on hand, and its tab so far in the oil spill has reached $1 billion.
Maybe more importantly, Street analysts have trouble seeing which of the major integrated oil players -- the only companies with checkbooks big enough to acquire BP, which even after it's freefall is a $116 billion market cap company -- would even want to acquire the BP, given the ongoing liability from the oil spill. BP CEO Hayward admitted on the Friday conference call that it is impossible to quantify long-term costs associated with the oil spill.
The acquisitions that the major oil companies have been making recently have been centered on gaining exposure to unconventional assets anyway, like the
In fact, the 8% of survey takers who think the extinction of BP is coming, by way of acquisition, were the lowest vote-getting group in the survey.
Approximately 10% of survey respondents couldn't answer the question about BP's survival.
"I just don't know, and have never been more confused," was the sentiment that these survey takers agreed with. It may have not been the most popular response, but it wasn't the least popular either. In the end, the confused evoke a note of honesty in the survey that may sum up fairly well the general level of the anxiety of the American public in watching the day-to-day twists and turns in the BP oil spill story.
-- Reported by Eric Rosenbaum in New York.
>>BP Caps Oil, but not Fear, Anger
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