If you're like me, you've wondered, between bouts of weeping, what will happen to the Gulf and the entire biosphere in the years following this disaster. Also, if you're like me, you want to know that justice will be meted out righteously.
It's therefore not surprising that many posters here, and many many more investors worldwide are wondering what will become of the corporation that made all this possible: is Beyond Petroleum beyond viability?
Short answer: no. BP, under some name, will continue and will continue to make tons of money, some of which will go towards paying for the Gulf, and some of which will be returned to the company's owners (shareholders) in the form of dividends.
Many here have speculated that BP will try to avoid responsibility by sheltering the profitable side via a "hiving" of the US Gulf clean up operations: this is not accurate. The hiving thing is just operational and has nothing to do with liability or even the financials of the corporation. In other words, thankfully, they can in no way get off so easily, but will instead pay enormously. For those interested, I offer this summary of what is going on in the market while we have our eyes on the Gulf.
I'm not a believer in the "efficient markets" theory, and I don't believe that the "invisible hand" is necessarily rational. Nevertheless, I think that the best way to find out what BP will be worth is to look at what the aggregate fortunes of all investors think it will be worth going forward.
Right before the explosion and leak, BP was trading at about $60/share on the NYSE; today, it's hovering in the $36-38/share range. That's a huge drop, but it reflects a market estimation that BP is still worth a great deal, and will be worth more in the future. To understand why, you need to look at the high dividends that accrue to shareholders. Dividends are the portion of a corporation's profits that are returned to the shareholders. Some companies don't pay dividends, but many energy companies pay out a large portion of profit. Currently, BP's payout is over 8% a year.
Even though investors know that the share price, which, as I said, has already plummeted nearly a third, could go much lower, they find value in VP for the dividend. For even as the price per share declines, the yield--or dividend return per share--increases.
This is, of course, outrageous--and it's not going to continue. I think that the dividend will be cut by 1/4 next period and by 1/2 after that--or something in that ballpark. Still, money will pour in to buy those shares: whether that money is stupid or smart is none of my business, but I guarantee you there will be buyers at every level. And what that means is that BP will not crash to a few dollars a share; indeed, I think it will bottom above $25/share, and may have bottomed already. Please see the chart for recent movement.
http://stockcharts.com/...
British Petroleum will remain a going concern, and will continue its oil operations, notwithstanding the enormous, probably historical fines and lawsuits that it faces for years to come.
Let's not forget that BP is the very worst large oil corporation in the world, as far as safety and environment is concerned--even prior to the Gulf disaster; nobody should be defending this criminally negligent company.
Take a look at this Business Insider report:
http://www.businessinsider.com/...
Want to hear something scary? BP (BP) has been fined by OSHA (Occupational Safety and Health Administration) 760 times. By contrast, oil giant
ExxonMobil (XOM) has been fined only once.
As The Stock Masters say: How is BP even allowed to operate?
My conclusion, then, is that 2-5 years out, BP will be just another large-cap mining/oil operation, with little added value from branding, and even less value from relationships with states that would grant future mining rights. In money terms, that means BP will be quite all right, though a shadow of it previous self. And this is good, in some ways, because it means that there will be abundant money to pay damages for decades to come. I wouldn't own BP for anything now; however, I noticed that a mutual fund in my IRA has BP as it's largest position, and I suspect that's true of many of us.