E-mail updates
Follow on Twitter
Subscribe to RSSMsnbc.com senior business writer John Schoen writes:
It sounds like a lot of money, but $20 billion easily could be just a down payment on the cost of cleaning up the Gulf spill and paying damage claims. But BP has a lot more cash where that came from.
With some 18 billion barrels of proven oil reserves, BP pulls roughly 4 million barrels a day out of the ground all over the world. At $75 a barrel, that's $300 million a day.
No one knows what all this will cost. Still, Wall Street is already combing through the company's financial statements and working on spreadsheet scenarios. At Oppenheimer & Co, oil industry analyst Fadel Gheit starts with a worst case scenario of $6 billion in cleanup costs and $6 million in damage claims — every year for 10 years. That works out to $120 billion.
Even if the payout reaches that level, Gheit tells CNBC, the company would generate what's known as "free cash flow" — a common profit measure — of $14 billion a year, and still have enough cash to pay shareholders half the $2.6 billion quarterly dividend BP recently suspended.
That assumes the company stands by its promise not to try to limit its liability. Some analysts have observed that the company could make a legal case that its liability should be limited to the assets of its North American subsidiary, which has assets of about $50 billion. But given the backlash it would face, it's not likely to pursue that strategy any time soon.
Leave a Comment:
I hear that BP doesn't even have "that kind of money" to escrow. Did our Prez ever think to check on that, or did this monumental figure just "sound like good PR" so people will think that he "did something really fantastic", thus boosting his ratings, which are miserably low. Think about that.
Please read something before you post so can at the very least sound like you know what you are talking about. BP earns close to 300 million per day! You figure it out!
NH- pick up a paper- good way to learn-they are releasing a 5 billion chunk a year, for next 4 years, and have said this is a beginning- simply means they will not pay their stockholders
And if you look- because of that, almost every pension fund wants to sue them, for the right act
20 Billion will not touch the current damage nor the future damage, and it will most definitely not cover the total destruction of the Gulf of Mexico, which will be the ultimate consequence. The well boar is collapsing, evidenced by cracks in the ocean floor and BP's own caution in not wanting to over pressurize the well casing. They know the well casing is disintegrating. The final collapse is eminent, and when it occurs there will be no stopping the underground oil reservoir from equalizing pressure with the Gulf Of Mexico. The result being the total destruction of the Gulf as an ecosystem, and most likely with the damage spreading into the Atlantic ocean and up the eastern coastline of the US.
Sure $20 billion probably won't be enough given the government's involvement. If the government has any control over that escrow fund you can bet the people that need it will be lucky to see $.50 on the dollar.
Rob- they have said to consider this a down payment, they will be there till last drop cleaned up, and are already paying documented eatery claims, and those of fishermen
NH: You heard? From where? The article just stated that BP has proven oil reserves of 18 billion barrels of oil, worth about $1 trillion at a very conservative $60/ barrel. ( $1 trillion is 50 times the $20 billion promised). Whether the escrow is in cash or in ownership of oil doesn't matter. Escrow means the funds are held by a 3rd party with no way for BP to take them back. Without a doubt, the funds in escrow will go to the cleanup and to cover economic damages from the spill.
Sure!!!!!
NH - you and your anti-Obama republicans are fulla BULL Sheet! You don't know anything other than whine because he won and is our president. Get lost looooosahs!
Does anyone look around the world? All the spills in Africa? All the destruction, loss of fishing. loss of water resources. I don't hear anyone crying for those people. Why? They are not american? Not a politician trying to make themselves look better? Not good enough for ratings? Come on folks where are we going with any of this? BP is going above and beyond where most companys would go. As far as you Democrats, how much more do you want BP to pay? Do you need more than 20 bilion so you can pay for some other program this country doen't have money for? Let me be the first to tell you to enjoy your four years in office. Because, mark my words...it soon will end.
Of course the main problem is that if BP puts 20 billion in an escrow then that's money they can't get to the repub's. This is what has they Repub's all worried about. Also watch to see which politicians make money from BP donations in the next few months.
Rob Simpson: Your scenario of well collapse sounds like a good plot for a disaster movie, but it won't happen in the real world. The formation holding the gas and oil has withstood the pressure for millions of years, and a tiny pin-hole like the 20-inch well bore does not increase the pressure or cause a major collapse of the seafloor, like some kind of sinkhole under the Gulf. The well extends thousands of feet below the seabed to the oil-bearing formation, and the chance of all that rock cracking and breaking open from this leak is zero.
IMO Bp went into that meeting knowing what they were going to do. You do not operate at that type of level and go to the WH with no plan.
Any chance you guys are democrats? Most of you sound like this is nothing but a chance to make one party look better than the other. As far as Maui71albert's comments and border line bad language do you have anything valid to add to this conversation beyond a rah! rah! session for your democratic candidate? I ask what about all the spills in Africa? Why aren't we demanding payments and holding people responsible for all those spills? Not good enough ratings? Nothing to gain politically. All I can say is I think BP is going up and beyond what most companys would do in regards to setting aside money. Thankfully this money wasn't turned over to the government so they could finance another program we as a country can't afford.
Dem's enjoy the remainder of your four years.
Michele,
You seem to be the one worrying about politics and Democrats V Republicans. This money is meant to for the clean up of oil and the claims of people who have had their businesses and livelihoods destroyed by a company that cuts corners on safety in order to save a few million dollars ( from 2007 to 2009 they had over 760 serious OSHA violations on just two rigs. They other companies had less than 15 on 53 rigs during the same period.) As far as Africa goes...that would be a problem that Africa (in particular Nigeria) needs to stand up and deal with. A good majority of their leaks are due to sabotage and civil war. In closing let me ask you.... Do you live anywhere near any of the effected areas? Because I do. I live in the state of Alabama and I have seen the effects that it has had on or state and our region. And for your information: My party affiliation is NONE! I am an Independent and am not bound by the blindness and ignorance of being a member of a "party" or a supporter of a "party" I vote for the best possible person for the job PERIOD.
Thank you
Dear Michele,
Let me preface this by saying I am a huge supporter of wildlife and nature. I love all things about the outdoors and animal life. I am one of the few that realize humans are killing this planet, day by day, without even factoring in Global Warning.
Now, that said. Let's focus on one thing... this country is the UNITED STATES. This oil spill is in the UNITED STATES. Most of us posters are citizens of the UNITED STATES. What does that mean? Why am I worried about an African oil spill when there is an oil spill on my front porch? What does Africa have to do with this argument... in any way???
Africa is a continent of countries that can't rule or even tend to their own problems. They are constantly playing pirates, raping and killing fellow tribe members, and fighting civil wars over nothing. A few terrorize their countries stealing what little food and aid money they do get. Why would I even think about sending BP to pay them off? So their guerrilla leaders can build nice compounds while everyone else starves? Think before you speak. If you want to go play Greenpeace, that is your business, but don't come on an American website and start preaching about Africa when we have our own problems. The United States needs to focus more on the internal affairs of this country and less on the other countries. Those "World Police" mentalities are what got us into all this debt mess to begin with.
BTW, while you are in Africa fighting for them, take a good look around. That civil war and poverty will soon be unleashed upon this once great country and a measly $20billion dollars from one of the richest companies in the world will not save anything.
Is this a trick question? Well, of course they have the money! As soon as they realize that paying off their debts comes before paying dividends to their stockholders, they'll have oodles of cash on hand to cover any damages from the oil leak. If there's a money crunch on their end, just don't pay the huge salaries of the BP executives! That'll pay for about half of what they need to pay in compensation to the "small people" in the gulf region they so callously are ignoring during this crisis.
Since this whole disaster sounds like a movie script. The small hole in the O-Zone mattered not until it began to influence climate. To enumerate the probability of an ocean floor collapse at zero is irresponsible, the ocean floor is just as unstable as any other part of the earth's crust. While this leak would be an unlikely single cause, it could be the "straw" or the "catalyst" to any number of geologic or environmental events.
I wouldnt worry about BP not having enough money to cover the cost of cleaning up this mess, BP has an endless supply of money in the form of consumers who are dependent on the petroleum that BP sells.
BP needs another 100 bil for the clean up?? no problem they will just raise the price of a gallon of gasoline and people will buy it, the consumers are the ones who will ultimately bear the cost of cleaning up this mess.
Seems like BP was blackmailed into providing the $20 Billion under the threat of a lawsuit by our government. More of Chicago style thug politics from our current administration. How many jobs are going to be lost as well from Obama's halt of drilling on current on-going projects in the gulf. His actions will increase the cost of oil per barrel, increase our dependence on more costly foreign oil and cost Americans jobs and further economic hardship. What's his intent? Government control of the oil companies as he has done with larger banks and the car companies. He is against free market enterprise and is all about big government and government control. Remember he was a member and indoctrinated in a church that preached G.D. America. A true socialist that wants to redistribute the wealth $20 Billion belonging to BP. Do you really believe that all of that fund will be used for the cleanup?
some much ridicilous hate
Jeff- yup, wil be clean up money- need to think though of pension and 401K managers who will also put in claim, (descending stock value) and no dividends this year
let's all just be honest here... instead of going on about democrats vs republicans, think of the bigger picture... if the average person went out and put a cracked pipe in the ocean and mass amounts of oil or other sewege got dumped, wouldn't they have to pay for it? more than likely by jail time? so doesn't it make sense that a company known for getting away with stuff should have to pay at least a little bit for making such an insane mistake? if you ask me he's getting off easy. just having to pay a minimal fraction of what his company's worth vs having to give up everything. why make such a big deal over sides when so many other people are suffering because of this? seems a little ridiculous... i doubt he'd have your back so much if you pulled what he did.
No matter what the Obama administration does there seems to be some ridicilous fool who hates for no apparent reason....Our President has just secure 20 billion dollars for AMERICANS and people are bitching..Ask the people of the Gulf coast if the appreciate this escro account...I dont agree with every decision our President makes but I didnt agree with every decision President Bush made either..
Had President Bush did the same he would be called a hero..Get over it President Obama is in charge...and he is doing a fair job...