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BP may have to sell assets to survive

A contract worker hired by BP patrols the shore for oil to collect in Dauphin Island, Ala.

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Kai Ryssdal: Today was a not-so-bad day for BP. It finally got that bit of pipe sliced off the well-head on the bottom of the Gulf of Mexico. It's U.S.-traded shares actually rose today in New York. But there was less happy news for the company, too. The ratings agencies Moody's and Fitch -- remember we told you about them yesterday -- downgraded BP's bonds a notch. BP debt does still carry one of the highest investment ratings. But both agencies warned of more downgrades to come, if the company can't figure out what to do about the leak and pronto. The longer this whole thing lasts, the bigger the doubts about BP's future -- both about how it'll pay the bills and in fact whether it might survive at all.

From London, Marketplace's Stephen Beard reports:


Stephen Beard: Estimates of the ultimate cost of the disaster have soared. The Credit Suisse bank now reckons BP's final bill could hit more than $30 billion.

Chris Skrebowski of Peak Oil Consulting says that could force BP into a fire sale.

Chris Skrebowski: It's certainly possible that they will have to sell off certain assets. In fact, the idea has been floated today that they maybe will sell off their Alaska holdings.

A highly valuable asset, says Skrebowski. Alaskan fields supplied one in every 14 barrels of oil that BP pumped worldwide last year. Its operations in the Gulf of Mexico were an even bigger source of crude.

Skrebowski: I suppose a possibility might be to sell a big chunk of that and bring in a partner, an American partner. It could solve two problems at once.

Raising cash and deflecting some American hostility towards BP. But most analysts say talk of an asset fire sale is premature. BP is an immensely rich company with low debt and huge profits.

Jason Kenney of the Dutch bank ING says the threat to BP's been wildly exaggerated.

Jason Kenney: Our base case assumption for the cost of the Gulf of Mexico is about $5.5 billion. Even if you quadruple it, it's only a year's profit for BP.

Much depends, however, on the eventual cost of legal settlements and claims, which could be stratospheric. After it's finally plugged the leak, BP's next major challenge will be capping the liabilities that flow from this disaster.

In London, this is Stephen Beard for Marketplace.

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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