Marketplace has a new podcast for kids, "Million Bazillion!" EPISODE OUT NOW
BP Spill: Ripples

BP may have to sell assets to survive

Stephen Beard Jun 3, 2010
HTML EMBED:
COPY
BP Spill: Ripples

BP may have to sell assets to survive

Stephen Beard Jun 3, 2010
HTML EMBED:
COPY

TEXT OF STORY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.