commentary on Politics and a little bit of everything else

BP is a Strong stock buy in some places…….The Company WILL survive…..It has to…..

The number crunchers have figured out what the Dog indistinctly has known since the beginning of this thing…

In the end…

A couple of years from now….


Is going to be fine….

And people are going make money on the stock when it comes back…..and it will…

I mean that….

By early summer the oil leak will be capped…

Money will be dispersed…

Some BP people may have serious legal problems….

But the company WILL survive this…

As bad as things are for the American Gulf coast states……

The Brits are not gonna stand by while their American cousins wipe out their equity in their premier oil company…A lot of Brits have their life savings in that stock….

The new government will not stand for the economic shock of the company going out of business giving all its money to the American’s in the South….

The Gulf of Mexico will survive this…

The people of the Gulf states will suffer a LOT…….

But…..Oil companies will still be taking oil out of the ground in the Gulf of Mexico

Mark the Dogs words…

I’m right on this…..

J.P. Morgan Chase analyst Fred Lucas is going where few analysts dare to go.

In a research note this morning, following a 16% drop in BP’s share price on Wednesday, Lucas declares “Latest technical rout reveals unprecedented value” in the oil giant’s battered shares.

Lucas has a “buy” rating on BP and presents a back-of-the-envelope case for why the company’s $84 billion loss in market value is overblown by a factor of more than 2X. That’s right–Lucas is arguing that BP shares have sold off twice as much as they should have since the spill.

Here are some of Lucas’s calculations, which he admits are based on rough estimates.

Clean up costs: A total of $5 billion, based on a rate of spending $60 million a day. This is about double the $28 million BP has said it has spent daily in the past 51 days. But it also assumes that the clean up will take about 120 days, which seems rosy given that it took several years to clean up the oil spilled from the Exxon Valdez in 1989. Only a few years ago, scientists were still finding oil from the spill along the Alaskan coast.

Federal Fines: While it’s difficult to know for sure the exact amount of oil leaking into the Gulf, Lucas assumes a worse-case scenario of about 1.9 million barrels in total. He also assumes that BP can cap the leak by July 4th. This implies a fine of $2.1 billion based on the Clean Water Act penalties of $1,100 a barrel. If BP is found to be grossly negligent, the fine could rise to $8.1 billion, at a per-barrel penalty of $4,300. This also doesn’t take into consideration fines from the many Gulf states affected by the spill.

Litigation Costs: Lawsuits will likely come from the tourism and fishing industries. According to Lucas, total annual revenue from tourism from the affected states is Alabama ($3 billion) Louisiana ($9 billion) Mississippi ($2 billion) and Florida ($57 billion). Fishery revenue from the affected states is Alabama ($1 billion) Louisiana ($3 billion) Mississippi ($0 billion) and Florida ($5 billion). Lucas says if these industries lose half that revenue in 2010 and 2011, then the total cost to BP would be $16 billion.

All told, his estimated cost is $29 billion

Loss in market value since the spill is $84 billion.

June 11, 2010 Posted by | Blogs, Breaking News, Counterpoints, Ecology, Government, Health, Law, Media, PoliticalDog Calls, Politics, Projections, The Economy, Updates | , , , , , , , | 11 Comments