July 7, 2010
The Gulf of Mexico oil spill has been serious trouble for BP. Not financially - by most accounts a company with the size and profitability of BP can comfortably handle even the outsized costs of such a large spill. No, the trouble has been political, as the President, governors of gulf states, even mayors have all taken their turn beating up BP. Political trouble, unlike financial distress, is hard to quantify and makes investors nervous.
BP has made mistakes and should pay to fix what has gone wrong. Our court system can provide due process to allow claimants to receive recompense for damages. But the administration has pressured BP, using the bully pulpit to compel the company to do it's bidding. Use of extralegal means by politicians is uncommon in mature democracies.
But the administration should be careful what it wishes for. Twisting BP's arm may drive it into the arms of someone else. Today's headlines bring rumors that BP may sell a substantial stake to Saudi investors. Whether we like it or not, BP's current management may be the devil we know.
GTC
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).