BP’s deepwater oil spill crisis intensified this week. Almost two months after the leak began, the US government upped its estimate of the oil gushing into the Gulf of Mexico to 60,000 barrels a day. That implies a spill the size of the Exxon Valdez is occurring every four days. President Obama decried the company’s “recklessness” in a prime-time speech and vowed to make the company pay for the damage it is causing. BP has reached a preliminary agreement with the government to set aside $20bn to pay compensation. Ratings agency Fitch slashed BP’s credit rating to two notches above junk status as concern over the financial damage grew.
What the commentators said
“The biggest threat to BP is the US government,” said the chairman of a rival oil company. “Anything’s possible in this environment.” BP faces civil damages based on how much oil leaks out from the well, while if it is found guilty of negligence the bill would be even higher. Goldman Sachs reckons BP could ultimately have to fork out up to $70bn (BP has produced $100bn in earnings over the last five years).
There are even fears that BP’s US assets could be confiscated, while BP could put the US business in chapter 11 bankruptcy, which would protect its assets from claims. Then there’s the reputational damage to consider, as Robin Pagnamenta pointed out in The Times. Note that the Brazilian government now appears to be thinking twice about a $7bn deal to sell BP deepwater assets. “The truth,” said Izabella Kaminski on FT.com, “is we’re still in the dark about just how bad this could get.”
BP: 336p; 12m change -36%