BP admits faulty safety practice, seeks white knight investor

An American flag lays in a slick of oil that washed ashore from the Deepwater Horizon oil spill in the Gulf of Mexico

TEXT OF INTERVIEW

Steve Chiotakis: The oil spill in the Gulf of Mexico has so far cost BP more than $3 billion. Now that includes the cost of containing the spill and cleaning up the oil. It also reflects the cost of drilling relief wells and compensating those affected by the spill. On top of that, another embarrassing admission from BP regarding safety. For the the latest now, we're going to bring in Marketplace's Stephen Beard, who's with us live from London with the latest. Hi Stephen.

Stephen Beard: Hello, Steve.

Chiotakis: What's this about safety? What's the company confessed to?

Beard: That it didn't follow a standard British procedure on the Macondo well, it did not write up a lengthy assessment of the safety issues around the project before it began. This practice became standard in Britain after a major blowout disaster in the North Sea in the 1980s. Shell says that it always produces a so-called safety case when it drills oil and gas anywhere in the world. BP admits it hasn't done this on any of its U.S. wells because so far it hasn't be required to do so.

Chiotakis: And what's the latest on how this disaster has affected BP, Stephen?

Beard: Oh, it's devastated the country. The share price is more than halved. It's now widely thought to be a potential takeover target. In fact, there were various reports over the weekend that BP is looking for a so-called white knight, a strategic investor to take a stake to fend off an unwanted bid. Nick McGregor, an oil analyst with brokers Redmayne-Bentley, says BP should be able to find a white knight:

Nick McGregor: The real issue is it will price it will attract with a strategic investor. As we saw with the banks during the credit crunch, there is money out there, but it comes at a fair price when you're in trouble and your back's against the wall.

So BP may not get much for the stake that it sells. Among the potential predators thought likely to stalk BP, two have been mentioned: Exxon Mobile and Petro China.

Chiotakis: All right, Marketplace's Stephen Beard joining us from London. Stephen, thanks.

Beard: OK, Steve.


Steve Chiotakis talks to Jeremy Batstone-Carr, head of research at the U.K. brokerage firm Charles Stanley.

TEXT OF INTERVIEW

Steve Chiotakis: The oil leak in the Gulf of Mexico has so far cost the British oil giant more than $3 billion. Share prices have tumbled by half since the oil leak began two and a half months ago. But today, investors smell rescue in the air and, in London anyway, are starting to buy amid reports BP is looking for some outside help.

Dow Jones reports this morning Libya's chief oil official as saying that a piece of BP would be a good buy for that country's sovereign wealth fund. And that's on top of another story we reported earlier, that the company is looking at Middle Eastern investors to prop up its capital after so much has gushed away. Jeremy Batstone-Carr is head of research
at the U.K. brokerage firm Charles Stanley. He's with us live from London. Hi Jeremy.

Jeremy Batstone-Carr: Hi.

Chiotakis: The company has had this terrible disaster. Who in their right mind would want a piece of it?

Batstone-Carr: Well, I think the first thing to say is that there's only a very cautious share price response to these rumors in the market in London. Shares are only about 3 percent or so, which is pretty small. Nonetheless, the share price has collapsed, as everybody knows, it is a stressed company, it's very unlikely to go bust, and what it has got -- and what global oil investors, sovereign wealth funds are interested in -- is what could be very sophisticated production technology. On that basis, a few buyers are beginning to show themselves, particularly from the Middle East.

Chiotakis: And say it doesn't get money from outside investors and becomes the target of some, I don't know, hostile takeover. What happens to that extraordinary liability?

Batstone-Carr: Well, clearly if the worst were to come to worst, which we and most people do not believe will happen, then obviously any potential buyer of the business would have to take on that liability. Nonetheless, bad as conditions are, in both in the Gulf of Mexico and for BP, we do not think that the company is frankly in danger of collapse. I would say, just in passing, that if it were to collapse, the impact on the financial markets would probably be about 10 times worse than that of Lehman Brothers.

Chiotakis: Mmmm. All right, Jeremy Batstone-Carr, in London. Thank you, sir.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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