BP gets boost from talk of new investor
source: http://nationalpost.com
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FINANCIAL POST - As the cost of cleanup for BP PLC’s runaway oil leak surpasses US$3-billion, speculation is swirling that the beleaguered energy giant might be looking for an investor to take a strategic stake to help fend of unwanted takeover bids.
Overseas reports on the weekend said that bankers advising BP were trying to gauge the interest of rival oil companies and sovereign wealth funds in making a 5% to 10% investment in the company at a cost of around US$9-billion.
Adding fuel to the speculation, a top oil executive in the North African state of Libya said Monday he would recommend the country’s sovereign wealth fund invest in BP.
“BP is interesting now with the price lower by half and I still have trust in BP, I will recommend it to the [Libyan Investment Authority],” Shokri Ghanem, chairman of Libya’s Nation Oil Co., told Dow Jones. “It’s a good opportunity for bargain hunters.”
BP’s shares — which have been chopped by more than half since the April oil rig explosion in the Gulf of Mexico — jumped Monday on the reports, gaining as much as 5% in London.
BP had little comment about the speculation, except to say it had no plans to issue new equity, but welcomed new shareholders and existing shareholders who want to increase their holdings.
Some big investors are balking at the prospect of BP selling a stake because it would dilute the value of their holdings.
But it would have advantages, too, including bolstering the company’s financial position to thwart unwanted suitors looking at taking out the entire company and providing some comfort to investors concerned about its future.
“Based on our numbers, BP doesn’t need to do this by any means,” said Pavel Molchanov, an energy analyst with Raymond James. “But clearly many investors have a lack of confidence in BP after the last two and a half months and a capital injection from a sovereign wealth fund would provide a tangible vote of confidence from a high-profile investor.”
Among those high up on the list of potential investors is the Kuwait Investment Office, a Middle East sovereign wealth fund that already owns a nearly 2% stake in BP.
The cost of BP’s clean-up is estimated at US$20-billion, though it’s not limited to that amount.
The company is raising funds to pay for the mess by suspending its dividend and selling about US$10-billion worth of assets. Its lines of credit also have been increased in the wake of the disaster, which is now the worst oil spill in history.
So far, BP has received 95,000 claims and made roughly 47,000 payments to those seeking damages.
The cleanup slowed last week because of rough seas caused by Hurricane Alex.
Adding to BP’s variety of clean-up efforts, a Taiwanese supertanker — called “A Whale” — on Friday started skimming up some of the 35,000 to 60,000 barrels of oil spewing from the spill each day.
BP is building relief wells that it hopes will enable it to permanently cap the well, which has been gushing oil since the company’s rig in the Gulf of Mexico exploded on April 20.
Although it looks as though BP might have the relief wells completed ahead of schedule in July instead of August, some analysts are still leery of investing in the company’s stock.
“Certainly the shares look cheap based on many metrics, but the headline risk is still very high,” said Mr. Molchanov, who’s had a “hold” on BP’s shares since April 29.
jwhitman@nationalpost.com
Via: http://www.canada.com/business/fp/gets+boost+from+talk+investor/3238575/story.ht...
Overseas reports on the weekend said that bankers advising BP were trying to gauge the interest of rival oil companies and sovereign wealth funds in making a 5% to 10% investment in the company at a cost of around US$9-billion.
Adding fuel to the speculation, a top oil executive in the North African state of Libya said Monday he would recommend the country’s sovereign wealth fund invest in BP.
“BP is interesting now with the price lower by half and I still have trust in BP, I will recommend it to the [Libyan Investment Authority],” Shokri Ghanem, chairman of Libya’s Nation Oil Co., told Dow Jones. “It’s a good opportunity for bargain hunters.”
BP’s shares — which have been chopped by more than half since the April oil rig explosion in the Gulf of Mexico — jumped Monday on the reports, gaining as much as 5% in London.
BP had little comment about the speculation, except to say it had no plans to issue new equity, but welcomed new shareholders and existing shareholders who want to increase their holdings.
Some big investors are balking at the prospect of BP selling a stake because it would dilute the value of their holdings.
But it would have advantages, too, including bolstering the company’s financial position to thwart unwanted suitors looking at taking out the entire company and providing some comfort to investors concerned about its future.
“Based on our numbers, BP doesn’t need to do this by any means,” said Pavel Molchanov, an energy analyst with Raymond James. “But clearly many investors have a lack of confidence in BP after the last two and a half months and a capital injection from a sovereign wealth fund would provide a tangible vote of confidence from a high-profile investor.”
Among those high up on the list of potential investors is the Kuwait Investment Office, a Middle East sovereign wealth fund that already owns a nearly 2% stake in BP.
The cost of BP’s clean-up is estimated at US$20-billion, though it’s not limited to that amount.
The company is raising funds to pay for the mess by suspending its dividend and selling about US$10-billion worth of assets. Its lines of credit also have been increased in the wake of the disaster, which is now the worst oil spill in history.
So far, BP has received 95,000 claims and made roughly 47,000 payments to those seeking damages.
The cleanup slowed last week because of rough seas caused by Hurricane Alex.
Adding to BP’s variety of clean-up efforts, a Taiwanese supertanker — called “A Whale” — on Friday started skimming up some of the 35,000 to 60,000 barrels of oil spewing from the spill each day.
BP is building relief wells that it hopes will enable it to permanently cap the well, which has been gushing oil since the company’s rig in the Gulf of Mexico exploded on April 20.
Although it looks as though BP might have the relief wells completed ahead of schedule in July instead of August, some analysts are still leery of investing in the company’s stock.
“Certainly the shares look cheap based on many metrics, but the headline risk is still very high,” said Mr. Molchanov, who’s had a “hold” on BP’s shares since April 29.
jwhitman@nationalpost.com
Via: http://www.canada.com/business/fp/gets+boost+from+talk+investor/3238575/story.ht...
