From Naked Capitalism, this great summary of BP’s response to date and this ominous warning:
Despite BP’s brazenness, it could be simultaneously preparing itself for worst case options. Some in the financial media see a breakup, takeover, or bankruptcy filing as a real possibility. From the Globe and Mail:
A few weeks ago, when BP was relatively confident it could stem the flow, there was little sense that BP faced anything more than a very expensive cleanup bill. While some still think that’s the case, others say the company’s breakup, takeover by a rival energy heavyweight, or bankruptcy in whole or in part is probable, if not certain. “BP could be facing the death penalty in the U.S.,” said energy analyst John Kilduff, of New York hedge fund Round Earth Capital. “The viability of the company is definitely in question.”
Another high-profile analyst agrees. Dougie Youngson of London’s Arbuthnot Securities said investors who think BP’s selloff is overdone could be gravely mistaken. The company has “the real smell of death,” he said a few days ago.
The reports on the move to segregate the oil spill operations from a managerial standpoint (it’s conceivable that each major production operation is a separate legal entity) may be a precursor to a “good company/bad company” split. From the Guardian:
BP is to hive off its Gulf of Mexico oil spill operation to a separate in-house business to be run by an American in a bid to isolate the “toxic” side of the company and dilute some of the anti-British feeling aimed at chief executive Tony Hayward, the company said today.
Yves here. If the Guardian has this right, BP could be in the process of trying to maneuver to keep US claimants from getting access to the full resources of the company to pay reparations in the Gulf. This could get nasty indeed.
It may be time to turn the question back to the incentives of corporate senior decision makers. If BP stands good and pays out all claims, which cannot be predicted at this point in time, it may wipe out even more shareholder value, executive stock options, bonuses, and career longevity. If BP management decides to stick it to the USA, externalize the costs with legal maneuvers, and keep the vast majority of BP assets and cash flow intact, the Executives and Board Members will personally have many millions more. (I hope their bonuses are paid in euros). So, how naive should President Obama be? Those calling for seizure or receivership may be on to something. My intuition tells me BP is going to cut and run.
BP will have much higher priced lawyers than the state or local governments. It may be time to pre-empt.