Wednesday June 16, 2010:
With BP's stock so beaten up it is time to evaluate the entire situation.
Here is another article regarding this situation...
10 Critical Facts about BP and the Gulf of Mexico Crisis
- On May 10, BP said it had already spent $350 million as a result of the Deepwater Horizon accident.
- By contrast, in the first three months of this year, BP made $93 million per day in pure profits. This does not include the huge salaries and perks of its executives that are considered “costs,” not profits. Thus, BP has spent what might seem to many people to be a big number on the accident ($350 million) but it is only equivalent to 4 days of pure profits for BP.
- BP has a market value (BP’s assets) of $152.6 billion.
- So far, BP has only paid 295 claims out of the 4,700 claims made against the company for damages and losses incurred from the Deepwater accident.
- JP Morgan Chase Bank owns almost 30 percent of BP’s common stock.
- BP is the largest producer of offshore oil drilling in the Gulf of Mexico.
- Citigroup analysts have formally advised investors not to worry too much about “the likely costs to the company [BP].” The Citigroup analysis notes that punitive damages against Exxon for the Exxon-Valedz oil spill in 1989 were originally set by the courts at $5 billion but reduced by 90 percent when the case reached the Supreme Court in 2008. The total cost to Exxon was $500 million in compensation damages and $500 million in punitive damages. The total cost imposed on Exxon after 20 years of litigation amounted to only $1 billion, or the equivalent of just 12 days worth of BP’s pure profits ($93 million per day) in the first three months of this year. Because of the Oil Pollution Act of 1990, BP and any other oil company that is responsible for an offshore oil accident is not legally required to pay more than $75 million in damages above the oil recovery costs. Thus, the government’s response to the Exxon Valdez accident was to actually protect the Oil Giants by limiting their liability and risk exposure in the event of a catastrophic accident. Again, the $75 million limit is less than 1 day of BP’s pure profits in 2010.
- BP is using carefully crafted language to imply that it may cover all the “legitimate” costs and “legitimate” damages (and they would presumably be the entity to determine which claim is legitimate) and that this amount will surpass the damage cap of $75 million set by the Oil Pollution Act. States BP’s executive vice president David Nagel, “A $75 million liability is not where our head is at this moment.” The most important three words of Nagel’s quote is “at this moment.” The law, as written, entitles BP’s executives to be the deciders of whether to pay or not to pay any damages above the $75 million cap. Right now the company is under the glare of global publicity and it can say whatever it wants to suggest that it is taking full responsibility.
- BP has a long history of safety violations and reckless behavior. They chose not to equip Deepwater Horizon with an acoustic trigger, a last-resort option that could have been activated from a remote location triggering the well to shut down even if it was damaged badly. This piece of equipment is required in several countries, but not in the United States. Though BP does employ them on their rigs offshore in England, they choose not to in the Gulf of Mexico. This piece of equipment costs $500,000 – an amount they make in pure profits in less than 8 minutes (based on 2010 earnings). BP also chose not to install a deep-water valve, which could have served as another last-resort option for cutoff. BP has been fined many times by the Occupations Safety and Health Administration (OSHA), and is the recipient of their largest fine ever. OSHA Deputy Assistant Secretary of Labor Jordan Barab has this to say about BP: “BP has systemic safety and health problems.”
- Unless there is an asset seizure and the placement of those funds in a trust to provide for full compensation and relief for the harmed people and the damaged environment, BP and its executives will avoid real responsibility to remedy the suffering and damage caused by their reckless and greedy search for super-profits. In fact, if BP and Big Oil is left untouched by government intervention the whole Deepwater catastrophe could turn out to be a source of more profits for Big Oil. A Citigroup analyst report states: “Reaction to the Gulf of Mexico oil leak is a buying opportunity.”
Don't Check In
At the Bates Motel
Quote: "A boy's best friend is his mother." — Norman Bates, Psycho
Arlington National Cemetery
Quote: "The fence around a cemetery is foolish, for those inside can't get out and those outside don't want to get in." — Arthur Brisbane
Memory Tricks
Quote: "As you get older three things happen. The first is your memory goes, and I can't remember the other two." — Norman Wisdom
Victim of the Spill
Quote: "We're going to clean-up the oil, we're going to remediate any environmental damage and we are going to return the Gulf coast to the position it was in prior to this event." — Admiral Thad Allen
Ready to Pitch
Quote: "You don't save a pitcher for tomorrow. Tomorrow it may rain." — Leo Durocher
2010's Mascot
Quote: "Football (soccer) is a matter of life and death, except more important." — Bill Shankly
Pointing a Finger
at the Witch Trials
Quote: "'Are you a good witch or a bad witch?' 'Oh, i'm not a witch at all! I'm Dorothy, from Kansas.'" — L. Frank Baum, The Wizard of Oz
Ramsey Changes a Tire
Quote: "Good driving has nothing to do with sex. It's all above the collar." — Alice Huyler Ramsey, as quoted in Ms.
Quote: "Most success springs from an obstacle or failure. I became a cartoonist largely because I failed in my goal of becoming a successful executive." — Scott Adams
Betamax Cassettes
Quote: "Today is a time of turbulence and stagnation, of threat and promise from a competitor: the magic, omnivorous videocassette recorder (VCR). In other words, it is business as usual." — Richard Corliss
Aching Head
Quote: "I'm very brave generally, he went on in a low voice: only today I happen to have a headache." — Lewis Carroll, Through the Looking Glass
Quote: "Time flies like an arrow, fruit flies like a banana." — Groucho Marx, Animal Crackers
Joseph Pulitzer
Quote: "Put it before them briefly so they will read it, clearly so they will appreciate it, picturesquely so they will remember it and, above all, accurately so they will be guided by its light." — Joseph Pulitzer
Mt. Chimborazo
Quote: "One sees great things from the valley; only small things from the peak." — Gilbert K. Chesterton
Quote: "Two of the cruelest, most primitive punishments our town (Hollywood) deals out to those who fall from favor are the empty mailbox and the silent telephone." — Hedda Hopper
Quote: "Make no mistake about it, Ted Turner changed the world with CNN." — Christiane Amanpour
Tuesday June 15, 2010:
With BP's stock so beaten up it is time to evaluate the entire situation.
Here is another article regarding this situation...
10 Critical Facts about BP and the Gulf of Mexico Crisis
- On May 10, BP said it had already spent $350 million as a result of the Deepwater Horizon accident.
- By contrast, in the first three months of this year, BP made $93 million per day in pure profits. This does not include the huge salaries and perks of its executives that are considered “costs,” not profits. Thus, BP has spent what might seem to many people to be a big number on the accident ($350 million) but it is only equivalent to 4 days of pure profits for BP.
- BP has a market value (BP’s assets) of $152.6 billion.
- So far, BP has only paid 295 claims out of the 4,700 claims made against the company for damages and losses incurred from the Deepwater accident.
- JP Morgan Chase Bank owns almost 30 percent of BP’s common stock.
- BP is the largest producer of offshore oil drilling in the Gulf of Mexico.
- Citigroup analysts have formally advised investors not to worry too much about “the likely costs to the company [BP].” The Citigroup analysis notes that punitive damages against Exxon for the Exxon-Valedz oil spill in 1989 were originally set by the courts at $5 billion but reduced by 90 percent when the case reached the Supreme Court in 2008. The total cost to Exxon was $500 million in compensation damages and $500 million in punitive damages. The total cost imposed on Exxon after 20 years of litigation amounted to only $1 billion, or the equivalent of just 12 days worth of BP’s pure profits ($93 million per day) in the first three months of this year. Because of the Oil Pollution Act of 1990, BP and any other oil company that is responsible for an offshore oil accident is not legally required to pay more than $75 million in damages above the oil recovery costs. Thus, the government’s response to the Exxon Valdez accident was to actually protect the Oil Giants by limiting their liability and risk exposure in the event of a catastrophic accident. Again, the $75 million limit is less than 1 day of BP’s pure profits in 2010.
- BP is using carefully crafted language to imply that it may cover all the “legitimate” costs and “legitimate” damages (and they would presumably be the entity to determine which claim is legitimate) and that this amount will surpass the damage cap of $75 million set by the Oil Pollution Act. States BP’s executive vice president David Nagel, “A $75 million liability is not where our head is at this moment.” The most important three words of Nagel’s quote is “at this moment.” The law, as written, entitles BP’s executives to be the deciders of whether to pay or not to pay any damages above the $75 million cap. Right now the company is under the glare of global publicity and it can say whatever it wants to suggest that it is taking full responsibility.
- BP has a long history of safety violations and reckless behavior. They chose not to equip Deepwater Horizon with an acoustic trigger, a last-resort option that could have been activated from a remote location triggering the well to shut down even if it was damaged badly. This piece of equipment is required in several countries, but not in the United States. Though BP does employ them on their rigs offshore in England, they choose not to in the Gulf of Mexico. This piece of equipment costs $500,000 – an amount they make in pure profits in less than 8 minutes (based on 2010 earnings). BP also chose not to install a deep-water valve, which could have served as another last-resort option for cutoff. BP has been fined many times by the Occupations Safety and Health Administration (OSHA), and is the recipient of their largest fine ever. OSHA Deputy Assistant Secretary of Labor Jordan Barab has this to say about BP: “BP has systemic safety and health problems.”
- Unless there is an asset seizure and the placement of those funds in a trust to provide for full compensation and relief for the harmed people and the damaged environment, BP and its executives will avoid real responsibility to remedy the suffering and damage caused by their reckless and greedy search for super-profits. In fact, if BP and Big Oil is left untouched by government intervention the whole Deepwater catastrophe could turn out to be a source of more profits for Big Oil. A Citigroup analyst report states: “Reaction to the Gulf of Mexico oil leak is a buying opportunity.”
Monday June 14, 2010:
With BP's stock so beaten up it is time to evaluate the entire situation.
BP is the third largest energy company in the entire world. They are the fourth largest company in the entire world, and they are quite possibly one of the most hated companies in the world. Their stock price has lost over 50% in 50 days; officials are reporting that this is the worst oil disaster in American history. The company will more than likely have federal lawsuits, at least four state lawsuits, countless class action lawsuits, and environmentalists will have their lawsuits aimed at taking down BP. So, with that information, it is time to purchase BP.
The company is actually very stable, although a ‘black swan’ could take the company down. A hostile takeover has been rumored; “Exxon (XOM), Chevron (CVX) licking their chops.” However, that will be unlikely,
Cash
Looking at BP’s balance sheet they have $8.43 Billion cash, and the ability to generate $7 billion per quarter. This is one of the strongest money making companies in the world, so with an estimated $30 Billion in free cash-flow per year they are a very ‘green’ company.
Free Cash Flow per year: $30 Billion
Debt
Current liabilities for first quarter are $10 Million, this was before the oil spill, since then the company has incurred an estimated liability loss of $15 Billion on the low end and $52 Billion on the high end.
Estimated Liability: $52 Billion
This doesn’t look so bad now, a company generating $30 Billion a year in free cash flow could slice the dividend in half to .42 cents and generate an additional $5 Billion in free cash flow, and borrow a total of $17 Billion, half of a year of free cash flow, and pay the highest estimates. However, due to laws instituted by the Valdez spill BP may get off much lighter than the $52 Billion.
BP Getting Bought Out
Why a hostile takeover won’t happen to BP.
Granted, BP trades as an ADR, but the company operating within the United States still has to go by the rules and laws governing the market that the company is trading on.
BP is the fourth largest company in the world. Any company that is in a position to attempt a takeover will undoubtedly face lawsuits regarding monopolization laws, so the best suited for the takeover is Exxon. Even if the lawsuits held no merit, major banks hold very large positions of BP and liquidity is fading, which means the banks are backed into a corner and being averaged into BP at anything below $35 is quite frightening when rumors of takeovers are widespread. So the banks will file legal action to avoid BP being bought out, or at least prolong the cause.
If a company does manage to purchase BP and survive the lawsuits, they will be faced with a whole new pickle. They will have purchased BP for roughly $50 Billion dollars and still face the clean up in the Gulf, another $50 Billion, so they will have used $100 Billion dollars to purchase the company, and then spend years in court getting the acquisition completed, in which federally speaking, the company would not be legally allowed to touch the oil spill, thus increasing the damage 10 fold. The government won’t let that happen.
The Black Swan
The Black Swan mentioned is if the US has a horrible hurricane season. If BP cannot get a lid on the oil by September at the latest the oil spill could be much worse and the costs I would suspect will go up 10 fold. Supposedly though, the $52 Billion from environmental scientists have said that they included a horrid hurricane season in their estimates, and if that is the case this black swan has no merit.
Buy BP
So, BP isn’t going anywhere. They can’t be bought out, and they have enough cash to payout the worst case scenario. The company did screw up, the stock tumbled and may continue to crumble for a short time (until they get the oil capped.) and then this stock will resume its 84 cent dividend, and climb back to $60 a share.
Purchase 1000 shares of BP at $30 a share for $30,000 and write covered calls for the company netting anywhere between $250-$2500 a month, (depending on knowledge and risk level) that $250*12=$3,000 then the dividend $3.36*1000=$3360. So you make $6,360 a year or 100 more shares of BP a year so by year 10 you will have more than doubled or tripled your money.
Disclosure: Long BP
Here is a good article about the Housing Market--- update from Market Watch.
Sunday & Monday June 14, 2010:
BP is the third largest energy company in the entire world. They are the fourth largest company in the entire world, and they are quite possibly one of the most hated companies in the world. Their stock price has lost over 50% in 50 days; officials are reporting that this is the worst oil disaster in American history. The company will more than likely have federal lawsuits, at least four state lawsuits, countless class action lawsuits, and environmentalists will have their lawsuits aimed at taking down BP. So, with that information, it is time to purchase BP.
The company is actually very stable, although a ‘black swan’ could take the company down. A hostile takeover has been rumored; “Exxon (XOM), Chevron (CVX) licking their chops.” However, that will be unlikely,
Cash
Looking at BP’s balance sheet they have $8.43 Billion cash, and the ability to generate $7 billion per quarter. This is one of the strongest money making companies in the world, so with an estimated $30 Billion in free cash-flow per year they are a very ‘green’ company.
Free Cash Flow per year: $30 Billion
Debt
Current liabilities for first quarter are $10 Million, this was before the oil spill, since then the company has incurred an estimated liability loss of $15 Billion on the low end and $52 Billion on the high end.
Estimated Liability: $52 Billion
This doesn’t look so bad now, a company generating $30 Billion a year in free cash flow could slice the dividend in half to .42 cents and generate an additional $5 Billion in free cash flow, and borrow a total of $17 Billion, half of a year of free cash flow, and pay the highest estimates. However, due to laws instituted by the Valdez spill BP may get off much lighter than the $52 Billion.
BP Getting Bought Out
Why a hostile takeover won’t happen to BP.
Granted, BP trades as an ADR, but the company operating within the United States still has to go by the rules and laws governing the market that the company is trading on.
BP is the fourth largest company in the world. Any company that is in a position to attempt a takeover will undoubtedly face lawsuits regarding monopolization laws, so the best suited for the takeover is Exxon. Even if the lawsuits held no merit, major banks hold very large positions of BP and liquidity is fading, which means the banks are backed into a corner and being averaged into BP at anything below $35 is quite frightening when rumors of takeovers are widespread. So the banks will file legal action to avoid BP being bought out, or at least prolong the cause.
If a company does manage to purchase BP and survive the lawsuits, they will be faced with a whole new pickle. They will have purchased BP for roughly $50 Billion dollars and still face the clean up in the Gulf, another $50 Billion, so they will have used $100 Billion dollars to purchase the company, and then spend years in court getting the acquisition completed, in which federally speaking, the company would not be legally allowed to touch the oil spill, thus increasing the damage 10 fold. The government won’t let that happen.
The Black Swan
The Black Swan mentioned is if the US has a horrible hurricane season. If BP cannot get a lid on the oil by September at the latest the oil spill could be much worse and the costs I would suspect will go up 10 fold. Supposedly though, the $52 Billion from environmental scientists have said that they included a horrid hurricane season in their estimates, and if that is the case this black swan has no merit.
Buy BP
So, BP isn’t going anywhere. They can’t be bought out, and they have enough cash to payout the worst case scenario. The company did screw up, the stock tumbled and may continue to crumble for a short time (until they get the oil capped.) and then this stock will resume its 84 cent dividend, and climb back to $60 a share.
Purchase 1000 shares of BP at $30 a share for $30,000 and write covered calls for the company netting anywhere between $250-$2500 a month, (depending on knowledge and risk level) that $250*12=$3,000 then the dividend $3.36*1000=$3360. So you make $6,360 a year or 100 more shares of BP a year so by year 10 you will have more than doubled or tripled your money.
Disclosure: Long BP
Here is a good article about the Housing Market--- update from Market Watch.
Saturday June 12, 2010:
NEW YORK (MarketWatch) -- BP PLC is expected to defer payment of about $2.5 billion in second-quarter dividends by placing the funds in an escrow account until the company can determine its liabilities from the Gulf of Mexico oil spill, the Times of London reported Friday in its online edition, citing people familiar with the situation.
The newspaper said future dividends are likely to be treated in the same manner until BP is on more solid footing, as the oil giant buckles under pressure caused by its massive oil leak in the Gulf of Mexico.
Friday June 11, 2010:
- Scientist now say 40,000 bbls oil per day out of BP's Blow Out one mile below the Ocean; Do you really think BP (one of the biggest companies and always an oil company {knowledge] did not know this originally...
- But why does BP continue each day to compound their mistakes? Nothing fits here, I don't know what it is but nothing fits.
Thursday June 10, 2010:
- There was no entry for Wednesday June 9, 2010.
- The Gulf fiasco continues and BP continues to shoot itself in the foot or so it seems.
- More and more the finger pointing is turning back to the U.S. Government and there is ample reason so it seems.
- This is the type of situation that should have prompted a quick resolution and the President it seems simply does not know what to do to resolve the problems. My thought is that he/they simply did not know what to do. BUT that will not fly in light of the serious problems that have developed.
Tuesday June 8, 2010:
Monday June 7, 2010:
Monday futures point to modest Wall Street gains
Mon, 07 Jun 2010 11:29:00 GMT
Monday June 7, 2010:
New York Times article re Gulf Oil Spill and BP
In Gulf, It Was Unclear Who Was in Charge of Oil Rig
Saturday June 5, 2010:
- The Stock Market has another rough start for June losing 324 points since the first of the month to close Friday @ 9,932 --- The Dow Jones Industrial Average ( DJIA 9,932, -323.31, -3.15%) fell 324.06 points, or 3.2%, to 9,931.22, off 2% for the week. The third biggest point loss of the year snapped a two-session winning streak, it being the first for the Dow in more than a month.
- The S&P 500 ( SPX 1,065, -37.95, -3.44%) fell 37.95 points, or 3.4%, to 1,064.88, down 2.3% for the week, while the Nasdaq Composite ( COMP 2,219, -83.86, -3.64%) declined 83.86 points, or 3.6%, to 2,219.17, off 1.7% from the prior Friday's close.
- Reasons; there is a grab bag, just reach in and pull one out. Cost of tea in China sounds reasonable to me... but the lower than expected new jobs report numbers was tossed around quite a bit as was the news that Hungary was (maybe) facing a financial crisis...hmmm...okay, think I will stick with the China argument...
- Oh yeah, our ongoing Gulf / BP fiasco...Think about it... BP
recently reported earnings (for one quarter) of 17 BILLION (that's
with a 'B')...and this company has been doing well financially
for a good long while so one could reasonably assume that the
earnings for a quarter of such a company, such as BP, would really
not be a lot more than chump change.
Right now the 52 week range of BP is 36.20 - 62.38 and they closed Friday @ $37.16 (after hours they are up about a dime)...assuming the high was when they became entangled in the blowout because they were cutting corners the stock value has decreased $25.22 and their market cap on Friday's close is listed at 116.34B still one of the largest companies in the world ( XOM @ 279.65 -- GE @ 167.73 [once worlds largest] MSFT @ 226.02 [also once worlds largest] AAPL @ 232.91 [Apple? they own 1% of the computer market?] WMT @ 189.76) by market cap which does not really mean a lot unless you know where all those billions of shares lie (for instance, the Walton's and upper WalMart management are very likely worth several times the companies market cap, if I said how much you wouldn't believe it but it is a bunch) ---
The point I want to make is that while BP has lost a tremendous dollar amount of market share capitalization the company itself has not lost any more of its assets than it has paid out in cash which thus far is only about a billion by their report which you can safely assume is about 500 million---they lie about their birth date why won't they lie about anything else??
Cut to the chase here... what I am getting at is BP is a very big company -- the President or anyone else cannot push them around successfully and should not attempt it (you notice the President has used some restraint)...BP will come out of this mess doing just fine and remember the stock that has changed hands??? well a lot of it sold at pretty high numbers and bet your bottom dollar that the same sellers will be buyers later on and maybe already...it is not too likely BP will get too much lower but then again this is the same market place that has dumped trillions on the jobs report and Hungary....go figure... - In light of all I said above and in my opinion I still believe that BP is a piss-poor operator and they should have left the drilling of their well to TransOcean and had they done that then this situation would not have happened. Almost all operators (usually the oil company) are cheap and try to cut corners; the drilling contractor knows the drilling and has to be able to curtail the operators ignorance. Apparently this did not happen in this situation and there may be more fault with TransOcean than has been explored thus far but by no means does this excuse BP and they must be held accountable ...Don't bank on it though as they will use their money to buy their way out (notice the big ad companies they have hired and the huge amount of money they are spending telling you how nice they are)--- all this is very likely at the expense of the victims...Bet your lungs on it..... Oh, here is an article you may find interesting.
Comment will resume Monday June 7, 2010... if all goes as planned...
Friday June 4, 2010:
The format of this site will be changing and there will not be regular updates for a couple of weeks to apx. June 15th. (experiencing technical problems)
- Not that it matters now but BP CEO "Hey-wood" admits what is already known that the company was not in the slightest prepared or capable of dealing with a blow out.
- And for Day 45 The bungling in the Gulf continues; we still have heard nothing but bullshit from anyone including the President.
- Mr. President! the time has long past that compentent operators should be handling the controls of the blow-out--further delay will produce the same results---we do have people that could manage this situation competently.
- This seems a safe daily statement; BP has validated its incompetence and continues to trash the Gulf.
-
When the universe starts looking orderly it is just messing with you.
ednesday May 19, 2010 -- <no updates between> Friday May 14, 2010
- Wednesday:
- And it did exactly that with murder of me both Monday and Tuesday as well as Friday and actually I have had only 3 gaining days in the entire month of May....very bad month.
- I will try to get updated here today if at all possible but I have a busy schedule and may not get back (here).
Friday's entry:
- So the market says--- if you thought that was bad look at this
one... another of my worst days...
What is really bad is that the market has given me three exit points that would have been fantastic and I was not wise enough to use them.
November 7, 2007:
Happy Birthday to Me!.... Well, this is it, Birthday number sixty-nine for me is here. Man, I never would have thunk it! Still I am so happy to be where I am and if it has to be this high of a number then so be it..... I look forward to a few (quite a few I hope) more, although I must add, "not too anxiously", and by that I merely mean that it would be okay with me if the time didn't sail by so quickly.....slooooooooow dooooooooown a little (lot).
November 7: --- Okay, so the list is not all that impressive but include the entire month of November and that list certainly is impressive!
Some folks born on this day.....
Cortez Cate, born on November 7, 1938
Archives: Prior information posted to this page:
(these pages will not load as they are cloaked)
- March 2010
- Dec 2008---Nov 2007
- April_2007_Oct_2007
- March - June 2007; ---
- March 2007;
- <Page 1 Jan-Feb 2006; --
- <Page 2 Mar-July 2006;--
- Page 3 Aug Sept 2006;--
- Page 4 May 9, 2005; --
- Page 5 May 2005 - Jan 2006;
email: (fight spammers by not using email hyperlink) cecate at pacbell dot net