BP bankruptcy ahead? Rivals 'licking their chops
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Some have wondered whether BP can financially survive the disaster in the Gulf. Sure, the oil giant is a diverse, international money-making machine, but the Guardian reported Monday that BP had already spent $1.25 billion seven weeks into the oil spill, with no clear end in sight. The company will be dealing with an avalanche of lawsuits for years (a New Orleans attorney told me she expects that some local law school grads will spend the bulk of their careers working on spill-related cases) and the company's stock recently nose-dived. In spite of all this, BP CEO Tony Hayward has repeatedly insisted that his company will see the disaster through until the Gulf Coast is "made whole" again.
But New York Times financial reporter Andrew Ross Sorkin notes that many industry watchers doubt BP can survive. Rivals Exxon and Shell are already circling like buzzards in anticipation that the company may stagger into oblivion. Or, as Sorkin puts it, they're "licking their chops" hoping to acquire a BP in bankruptcy: "Flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanup — and potentially billions of dollars in legal claims — into a separate corporate entity."
Sorkin reckons that the company's legal liability and long-term cleanup costs could work out to a red-ink tally of $15 billion to $40 billion. He writes: "The company has about $12 billion in cash and short-term investments, but there is already a debate about whether it should cut its dividend out of fear that it could run out of money. Of course, it could sell assets or seek loans, which in this environment is still not that easy."
Sorkin notes that Wall Streeters are already talking about a "Texaco scenario" — a buyout from an industry rival akin to the deal struck allowing Pennzoil to take over Texaco after the former firm won a multibillion-dollar jury verdict against the latter in a dispute over the sale of Getty Oil. But that was the outcome of a bare-knuckled clash of corporate chieftains, and the BP catastrophe probably won't produce any such dramatic resolution overnight. After all, Exxon — the company responsible for the Alaska Valdez disaster, which had formerly been the largest oil spill in U.S. history — is now the most profitable and highest-capitalized corporation in the country.
— Brett Michael Dykes is a national affairs writer for Yahoo! News.
