by Mike Mulvihill
How much is your company’s reputation worth? In the case of BP, apparently the U.S. government’s estimate is $20 billion. That’s how much the government has told BP it must set aside in an escrow account to restore public trust in BP, and, oh by the way, to expedite payments to help clean up and provide relief to Gulf Coast claimants.
However, I suspect that like me, the U.S. believes even a behemoth like BP may crumble under the financial weight of the massive clean-up effort the spill requires. So President Obama is making sure money is set aside now before BP ends up bankrupting its U.S. operation to cap financial obligations much like Johns Manville did in the face of asbestos-related mesothelioma claims and pharmaceutical firm A.H Robins as a result of the Dalkon Shield.
The Associated Press reported on June 14 that BP’s costs for responding to the massive oil spill in the Gulf of Mexico have risen to $1.6 billion. A mere pittance compared to what it will take to clean marshes and entire eco systems, but much more than $750 million cap under current U.S. law.
BP’s stock, which has fallen by 50 percent since the spill began, is considered an income stock (i.e., invest for the quarterly dividends more so than the share price appreciation). Rumors are BP will delay its normal stock dividend payout or two in response to the Gulf oil spill.
Meanwhile, BP has found more ways to foster distrust than a pathological liar at a revival meeting. The latest is hidden among the goods news that BP’s will ramp up current oil collection efforts made possible by its Top Hat maneuver to capture more of the oil spewing from the deep sea rift. They say the collections will increase from 15,000 barrels a day to 40,000. Only problem is that the 40,000 barrels is more than BP has stated the well was gushing mere weeks ago.
And, The Wall Street Journal has spotted the rats fleeing the sinking ship. The Journal reported today that Chevron and other oil and gas companies are distancing themselves from BP. In the article, Chevron CEO John Watson wouldn’t directly criticize BP, but he said that even before the current disaster, Chevron had in place policies and procedures that might have avoided the oil-well blowout that caused the spill. “This incident was preventable,” Watson said.
All I know is if this was Bedford Falls, I’d likely be among the throng lined up at the good old savings and loan to get my last dollar out before the thing failed. Sorry, George Bailey.
Photo courtesy of mueredecine