First off, everyone worried about BP's pension obligations to former employees can breathe a sigh of relief; expert consensus seems to be that BP has the bankroll to survive this. If they heed the calls from Congress and elsewhere to forgo their $10 billion dividend payment, they probably will be fine for covering expenses.
Then again, no one appears able to agree on just what the total costs will be, especially since that's a function of just how much oil is leaked. Hayward fantasizes that clean-up costs will be in the neighborhood of $3.5 billion. * snigger * Other analysts at Credit Suisse estimate closer to $15-23 billion, with another $23 billion in compensation claims. There is agreement, though, that BP will come through this. The question is, in what condition?
This will push BP's total bill to date to around $1.4bn, including the cost of trying to stop the leak, mopping up oil that reaches the shoreline and compensating those affected by the disaster. The final cost is unclear, though, with President Obama insisting the company was responsible for the Deepwater Horizon leak and will be made to pay for it.
Although some City analysts believe BP can cover these costs, others calculate that the company may be forced to sell some assets – especially if it plans to maintain its dividend.
Douglas Ober, chief executive officer at Petroleum & Resources, suggested that BP's 26% stake in the Prudhoe Bay oil field in Alaska might have to be sold.
...Other experts believe BP, whose market capitalisation has fallen to around £82bn, could be a takeover target.
They've already lost $65 billion in market capitalization since this happened. And just this week, Fitch downgraded their credit rating; granted, it was only from AA+ to AA, but it follows on the heels of Standard & Poor's, which in May set their outlook for BP to negative. Moody's also cut BP's outlook to negative and currently has them at AA1 (equivalent of AA).
A lower credit rating pushes up the cost of borrowing, as it shows that a company, or country, is a riskier investment and more likely to default. Fitch said, though, that BP should not have trouble refinancing its debts if it needs to free up more cash to pay for the clean-up operation in the Gulf of Mexico.
..."The downgrade of BP's ratings reflects Fitch's opinion that risks to both BP's business and financial profile continue to increase following the Deepwater Horizon accident in the US Gulf of Mexico," said Fitch.
Fitch's worst-case scenario projection is $5 billion in clean-up costs per year. That's just clean-up costs, not including fixing the well or litigation expenses; it'll be a while before we know how much they have to pay out in damages. I think we can be sure Fitch et al are watching very closely, though. There are a lot of factors at play, all of which have their own special flavor of havoc to wreak. For example, this oilbroglio has resulted in a not-at-all-insignifcant spike in insurance rates for offshore oil rigs:
The insurance industry, reeling from losses estimated at between $1.4bn and $3.5bn (£2.4bn) caused by the disaster, has been quick to raise its prices. Deepwater Horizon is the largest single oil drilling rig loss since the 1988 Piper Alpha platform explosion in the North Sea, which triggered $3.6bn of insured losses (in 2009 dollars).
...The agency said early reports indicated that insurance premiums for deep-water rigs have jumped by up to 50% since the 22 April explosion, while the cost of insuring rigs operating in shallow waters has climbed by 15-25%.
Life just got a lot more expensive for all offshore drilling ops in the future, regardless of what comes out of the regulatory scene. It'll be really interesting to watch that play out in time. I'm sure Hayward's admission that BP hadn't adequately prepared to handle a spill such as this had to play a part in that; nothing instills confidence like incompetent planning!