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BP As Schrodinger's Cat: Simmons Upgrades Firm To Buy, Seeing It As Both Bankrupt And With $52 Stock Price At Same Time

Tyler Durden's picture




 

Ever wonder who may have been buying up every share of BP stock earlier this week, especially when it plunged to 14 year lows on June 9 amid media frenzy based on a Fortune story in which Simmons & Co.'s CEO Matt Simmons was quoted as saying that BP "has about a month before they declare Chapter 11." Why, Simmons & Co. itself, of course. In a note released to clients on Friday, Simmons & Co, upgraded BP from Neutral to Overweight, in which Mr. Simmons amusingly notes, "the kitchen sink of headlines have been thrown at BP shares over the past 2 weeks, thereby partially desensitizing the shares to the news." With his dire warnings of an imminent bankruptcy just two days prior to the upgrade, Mr. Simmons surely did his fair share to contribute to kitchen sink. It is only fair that after creating a near-panic in the name, that the firm would now suddenly be stuck in a Schrodinger's Cat world, in which BP is seen as both bankrupt, and having a $52 price target at the same time.

While we don't know if Simmons & Co. trades on a prop basis, and actually accumulates its own trading positions, the firm does disclose it has a Sales and Trading operation, which likely means that it does dabble in stocks for its own account. Reading the report does not help: the only relevant disclosure in Robert Kessler research piece is that "Simmons & Company International may seek compensation for investment banking services from BP p.l.c. and other companies for which research coverage is provided." While we wish the firm lots of luck in being picked as an advisor ever again by BP in this particular universe, we do wonder, and assuming the investment bank does not transact on its own account, just what other Simmons clients  may have been axed in the stock, and had an interest in seeing a plunge in the stock, only to see the firm responsible for the 14 year low turn around 48 hour laters and issue a $52 price target on a company that according to the big boss himself, was supposed to be declaring Chapter 11 by mid-July. As we noted on Wednesday, "all this media rumormongering should certainly be taken with a blob of oil." Little did we know how bad it really was. Next up: we expect a consortium of banks led by Goldman to LBO all the offshore oil drillers imminently.

Report can be found at dealbreaker.

 

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Sat, 06/12/2010 - 21:18 | 410001 Gordon Freeman
Gordon Freeman's picture

Anyone who listens to Matt Simmons has only themselves to blame...

Sun, 06/13/2010 - 02:35 | 410310 Fish Gone Bad
Fish Gone Bad's picture

+1

Eventually BP will become a raging buy.  That day is certainly not any time soon.  I am thinking after hurricane season and the next market sell off.

Sat, 06/12/2010 - 21:20 | 410003 Mitchman
Mitchman's picture

Speechless.

Sun, 06/13/2010 - 00:23 | 410192 Bananamerican
Bananamerican's picture

MOTHERFUCKERS

Sun, 06/13/2010 - 09:13 | 410440 russki standart
russki standart's picture

How eloquent<g>

Sat, 06/12/2010 - 21:22 | 410005 Apostate
Apostate's picture

Hahaha. Dump & Pump, baby!

Sat, 06/12/2010 - 21:28 | 410011 nmewn
nmewn's picture

Shocking! ;-)

Sat, 06/12/2010 - 21:39 | 410025 FEDbuster
FEDbuster's picture

How in the hell can BP survive this?  The expenses, lawsuits, fines, etc... will go on for decades.  I know they have deep pockets, but this is a "Superfund" mega disaster.  If there is no cap on liability, there is no way they will survive.  BP is the Lehman Bros. of the seven sisters.

Maybe Simmons is pulling a Goldman trick, tell your clients to buy while you are selling?  Wouldn't be the first time this has happened.

Sat, 06/12/2010 - 22:13 | 410060 geopol
geopol's picture

Presently there is a $75,000,000.00 cap on liability when drilling in the gulf. The congress wants to increase this to 10 Billion,,thus eliminating the rationale for drilling there in the  first place....This is emotional / political response to the disaster...but if we go forward on this it will be a rationale that the U.S. is not a country of laws,,,we can changes them at will,,,,,Contracts mean nothing...I'm not supporting BP FOR THIS DEEP WATER disaster,,,,however, if we continue to surge the laws as we deem fit,,,who will invest in this country with confidence in the structure of law / contracts..

Congress is political,,nothing else..

Remember, the congress enacted the 75,000,000.00 cap to encourage drilling... Now they want....

Sat, 06/12/2010 - 23:40 | 410150 Trimmed Hedge
Trimmed Hedge's picture

From what I understand, that $75 mil liability cap was written to become null & void under gross negligence / criminal stuff.

Sun, 06/13/2010 - 13:20 | 410616 Kali
Kali's picture

The lobbyists get these "caps" for all their industries.  Nuclear Plants were given the same.  I would love to be able to do whatever I want and not have to pay the consequences.

Sun, 06/13/2010 - 19:11 | 411273 Mentaliusanything
Mentaliusanything's picture

BP thought that the Insurance industry was bleeding them with the Premiums they wanted for cover against this sort of event so they went "all in" and self insured. Now they are not so self assured. Being a Big cash cow does not mean they are blessed with a bottomless cup. Bleeding from every orifice is not a good prognosis.  

Sun, 06/13/2010 - 02:28 | 410307 JMcLeod
JMcLeod's picture

Keen observation re the meaning of contracts in the U.S. As many have found out - especially since the going has become tougher - the former moralist of the world, forgets all about the ethics and fairplay it preached when things move against it. Not even long-time friends and allies are spared. Sad.

Sun, 06/13/2010 - 08:25 | 410417 New_Meat
New_Meat's picture

Ruth Ginsberg had no problems in screwing Chrystler bond holders in favor of UAW--"no one is objecting."

- Ned

Sun, 06/13/2010 - 09:36 | 410448 russki standart
russki standart's picture

US a country of Laws???..Ask the Iraqis. Geopol aka T., you are brilliant, a shining star on the firmament abounded by the dull lights of contemporary american historians and journalists. But even you, my friend, cannot comprehend the depths of human depravity because your suffer from a condition of moral conscience, an inner voice that knows right from wrong.  You are thus  separated by interstellar gulfs of understanding from a ruling class that denys G-d and practise any barbarity without a moral twitch. Laws mean nothing to our elites, other than as a way to restrain the behavior of the wage slaves. They will sweep away legal constraints if it profits them.

Our ruling class knows that Laws do not apply to them and will do anything they want to further themselves at the expense of the useless eaters. We have a president who was never born in the US, a criminal war in progress against Iraq (Remember the weapons of mass destruction?), a congress beholden to a foreign hostile power etc, etc, ad nauseum.

We can summarize the unspeakable cruelty of our elites by noting that Madeline Albright  by noting doesn't have a problem with death and destruction. On Jan 8, 2000 (60 min - Leslie Stahl) she was asked about the half million children who'd died under President Clinton's sanctions - and was it worth it? She replied, "The price - we think the price is worth it." Fucking Psycopaths, all.

 

 

Sat, 06/12/2010 - 22:18 | 410063 DeeDeeTwo
DeeDeeTwo's picture

BP Congressional hearings this week = more "kitchen sink headlines", baby. And the whole America as a "country of laws" thing is nothing more than nostalgia.

Sat, 06/12/2010 - 22:21 | 410069 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Nostalgia for five seconds...Goldman who?

Sat, 06/12/2010 - 21:42 | 410026 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Go ahead Bill, buy the whole damned company, see if I care.  Someone has got to foot the bill.

Sat, 06/12/2010 - 21:51 | 410034 King_of_simpletons
King_of_simpletons's picture

What's new ?

Sat, 06/12/2010 - 21:55 | 410036 RobotTrader
RobotTrader's picture

Didn't Goldman downgrade the entire driller group last week?

I'm expecting an upgrade to "Super Duper Buy" Monday morning by various no-name Chop Houses, hired by Goldman no less.

That will create a gap up in the OIH, leaving numerous shorts stranded on the infamous "island bottom"...

And what is going on next week?  Oh yeah, Options Racketeering Week.

LOL...

Sat, 06/12/2010 - 23:47 | 410159 Rick64
Rick64's picture

LOL thats good.

Sun, 06/13/2010 - 00:19 | 410187 Adam Neira
Adam Neira's picture

Never smile at a crocodile !

Sun, 06/13/2010 - 02:53 | 410315 russki standart
russki standart's picture

Yeehaw! Great Post!

Sat, 06/12/2010 - 22:19 | 410067 Babalooee
Babalooee's picture

Matt Simmons is Chairman, not CEO. In the last few weeks Simmons &Co said that Matt Simmon's opinions were not necessarily there's. And where does it say that this report was authored by Mr Simmons? 

Sat, 06/12/2010 - 22:24 | 410073 milbank
milbank's picture

Yep.  A "dump" to buy and then the pump to sell.  Sleazy company.

Sat, 06/12/2010 - 23:24 | 410090 Demosthenes20XX
Demosthenes20XX's picture

FYI -- Matt Simmons holds the title of "Chairman Emeritus" of Simmons & Company.

He is no longer associated with his eponymous energy investment bank in any official capacity and the company has publicly stated that his opinions are not reflective of the bank's opinions.

TD - don't use wikipedia as a fact checker for folks' biographies and current employment status. The wiki entry for Simmons (http://en.wikipedia.org/wiki/Matthew_Simmons) was recently edited from 'chair and CEO' to 'chairman emertirus' about a hour or so ago.

Simmons & Company's current CEO is named Colin Welsh, as shown here:

http://www.simmonsco-intl.com/company_history.asp

 

 

 

 

 

Sun, 06/13/2010 - 02:19 | 410302 Augustus
Augustus's picture

Thanks for posting the links.  In the last interview I saw of him he stated that he was no longer associated with Simmons & Co.  I suppose Chairman Emeritus is about as far removed as they can get the founder.

Sun, 06/13/2010 - 03:41 | 410331 EscapeKey
EscapeKey's picture

Excellent post. Thanks for clearing that up.

Sat, 06/12/2010 - 23:31 | 410140 Tree of Liberty
Tree of Liberty's picture

Demosthenes,

Your spot on with your fact check....

Additionally to Matt Simmons credit he has been one of the only "Oil Experts" to acurately assess what was really happening and how catastrophic this will be to our way of life in the Gulf Coast as well as many other places in the world.  I dont think he is to interested in profit making at this point; check his last interview out with Dylan Ratigan on June 7th. 

http://www.msnbc.msn.com/id/21134540/vp/37560013#37560013

Sun, 06/13/2010 - 02:54 | 410316 Augustus
Augustus's picture

He has not accurately assessed anything.

He states that the well has a TD formation pressure of 50,000#.  It does not.  It is about 13,500.  Neither the depth of the well or the pressures encountered are anything unusual.   Wells are drilled to 25,000 ft and have pressures over 20,000# on a fairly regular basis in that part of the world.  The well was drilled all the way to TD and was under control using the normal method of drilling mud.  The rig crew tripped the tools out of the hole, ran the logging suite, and ran the final casing string with the well under control using drilling mud.  They ran the cement job with the well under control using drilling mud.   Something occured that caused the cement job to not work properly so that when they reduced the total mud weight by replacing some with seawater the oil and gas were allowed to enter the well resulting in a blowout.

Simmons has stated that the pipe and BOP were blown out of the well and are lying on the seabed several miles from where the hole was actually drilled.  That is impossible.  Do you actually believe that 13,000 ft of steel casing came out of the well and up through the rig floor without anyone seeing it go flying?  If you look at the various ROV cams  looking at the wellhead and do the calculations on the locations they display you can confirm that they are within a few yards of the intended and permitted well location.  His claim is balderdash nonsense.

The relief wells are drilling to intercept the bottom of the blowout well.  In the distant past they were drilled to relieve the flow from the blowout and are still referred to as relief wells.  The practice today is to drill an intercept well and re-establish from the bottom the heavy mud column that had controlled the well in the first place.  I have read that the well control expert on this job was successful on the first intercept try in the last 8 relief wells.  If they miss the bore on the first stab they pull out several hundred feet and drill again to the new target.  Probably a week for the new intercept.

I am really surprised that so many posting here can be taken in by these out and out bogus claims.  As to his claim of Peak Oil, you can verify that the world oil reserves were increased last year.

Sun, 06/13/2010 - 11:39 | 410524 Gordon Freeman
Gordon Freeman's picture

Thank you.  Matt Simmons is a fucking sociopath who will say anything to promote his own agenda.

Sat, 06/12/2010 - 23:54 | 410168 AVP
AVP's picture

Is it or is it not "solid gold"? I suspect not.

Thoughts?

http://news.bbc.co.uk/2/hi/world/africa/10301713.stm

Sun, 06/13/2010 - 00:13 | 410182 QuantumCat
QuantumCat's picture

Simultaneously occupying a state of both dead and alive...    yes. Ride the wave...

Sun, 06/13/2010 - 03:37 | 410330 ApplesConspiracy
ApplesConspiracy's picture

Don't knock it, it works for the federal government too.

Sun, 06/13/2010 - 00:17 | 410184 Adam Neira
Adam Neira's picture

British Petroleum will not declare bankruptcy. You do not throw the whole baby out with the corporate bathwater because of one accident. Either/Or thinking is the hallmark of halfwits. BP employs a lot of people. Certain sections of the private sector can be redeemed. Some companies like Sodom and Gomorrah should be allowed to die if they have absolutely no merit. There were problems with the engineering on the Deepwater Horizon site, but all projects and jobs carry risks. The gas release from beneath the seabed was of a different order of magnitude than had ever been seen before. Nutcase greenies threatening Tony Hayward and his family are missing the point. Like the unpronounceable volcano and the Haiti earthquake this oil spill is another "test" for humankind.

 

 

Sun, 06/13/2010 - 00:30 | 410197 Bananamerican
Bananamerican's picture

May i respond with a gentle "fuck you"?

Sun, 06/13/2010 - 00:59 | 410236 Hephasteus
Hephasteus's picture

Cool They should make a My Bad Law. You can do anything you want as long as you promise to be responsible and don't destroy more than 4 states and 1 country.

As long as you get to privatize the profit and spread the downside to everyone you accidently affect.

I'm totally going to open up a car insurance company and start selling policies with only 50 bucks in the bank. And I'm totally going to start selling multri trillion dollar CDS with nothing to back it up.

And I'm totally going to open up a C4 plastic explosive franchise. With glossy sales brochures on how to pay your rent in your manhatten appartment by cooking plastic explosives in them. Then I'll introduce C8 to the franchise and we can call it the McDouble.

Everyone's going to be able to profit from irresponsibility aren't they or only the "chosen" few? You know what else would be fun. Experimenting on humans. I need to get me some of that. Sign me up for the risk/reward curve. All the reward none of the risk.

http://www.youtube.com/watch?v=7hxe85iErew

Sun, 06/13/2010 - 03:51 | 410337 thisandthat
thisandthat's picture

There already is such a law, Clinton used it on the Chileans, over Pinochet's tiranny (oops, sorry - our bad! was all they got, 30 years late(r)) - just wonder what if Latin America went post-9/11 on the US, for their "backyard management" practices.

Sun, 06/13/2010 - 13:18 | 410614 FEDbuster
FEDbuster's picture

Worked for the banksters (except Lehman Bros.)  Heads I win, tails you bail me out so I win, too.

Sun, 06/13/2010 - 02:55 | 410317 russki standart
russki standart's picture

Let me guess... you are long BP at 59.25..

Sun, 06/13/2010 - 02:55 | 410318 russki standart
russki standart's picture

Let me guess... you are long BP at 59.25..

Sun, 06/13/2010 - 01:23 | 410259 YourAverageDebtSlave
YourAverageDebtSlave's picture

We are talking about oil...the lifeblood of modern civilization.  Almost every man-made thing we see around us relies on this substance.  All this fussing is a show in my opinion.  Obama and the rest of the administration can talk a good game and use their national media propaganda team  (aka the so called News) to sound tough, but I'm willing to bet, behind closed doors BP is running the show.  I also wouldn't be surprised if BP's primary goal is to salvage as much oil as possible even if it delays the cleanup and the cessation of the leak.

Sun, 06/13/2010 - 01:29 | 410263 yabs
yabs's picture

we are led the believe oil is the lifeblood
research proves otherwise
Ford built a cra out of hemp and powered it with
hemp oil
I ma sure there are other techonoligies we are kept in the dark about
we use oil as its a nice way for big compnaies to control us
and keep reach

Sun, 06/13/2010 - 02:18 | 410301 Voodoo Economics
Voodoo Economics's picture

Ya got me yabs. A car out of hemp -n- hemp oil.  Hilarious!!  I thought I heard that on that Art Bell show one night when I was driving X-country or smokin some.

Ya better be watchin over your shoulder now - you weren't supposed to know about the fascists govt's secret labs. 

BTW Don't give Obama and the greenies any more ideas. 

Sun, 06/13/2010 - 03:53 | 410338 thisandthat
thisandthat's picture

Cheech & Chong FTW!

True, though.

Sun, 06/13/2010 - 08:31 | 410421 New_Meat
New_Meat's picture

Duuuuuude.

Sun, 06/13/2010 - 12:03 | 410540 Hephasteus
Hephasteus's picture

Fucking Pot Smoker: If you let us grow pot everywhere we'll invent shit out of it like rope and cars and clothes.

Everybody else: You're high.

Sun, 06/13/2010 - 02:00 | 410287 steve2241
steve2241's picture

There are "fighting words" being thrown out, by one of the top guys in the U.S. Coast Guard (a rear admiral), at BP in the past 12 hours. " Get your ass in gear or move aside." By Monday or Tuesday, my guess is all BP operations in the Gulf associated with this catastrophe will be commandeered by coast guard/military/federal government. National Emergency.

Sun, 06/13/2010 - 03:00 | 410320 Augustus
Augustus's picture

So, they teach deepwater well control at that Coast Guard Academy?

They are not going to displace BP.  You can be assured that BP has available all of the best information and ideas of all of the large oil companies.  It takes about nine months to have a human baby.  Abortions are quicker.

Mon, 06/14/2010 - 00:44 | 411832 sumo
sumo's picture

Both BP and Obama are too blame for letting this disaster inflict more damage than necessary:

http://politicallore.com/blog/?p=1862

http://www.rnw.nl/english/article/dutch-oil-spill-response-team-standby-...

The oil is nowhere near the River Thames, so bottom line, BP doesn't give a shit.

 

Sun, 06/13/2010 - 02:48 | 410312 russki standart
russki standart's picture

My dear friend Tyler,

There is no need to rely Schrodinger's Cat to explain the multiverse aspect of Simmons recommendations. It is simple, Simmons went short on BP, covered and then issues a recommendation to suck in new buyers. They will go short again and cite their worthless  recommendation as proof of the chinese wall between research and sell side. Even better, Schrodinger's cat can go back to entertaining quantum physics students, instead of suffering in the servitude of mendacious investment bankers....A true Win/Win for all.

Sun, 06/13/2010 - 03:46 | 410333 Popo
Popo's picture

Another possibility:  Either Simmons pulled a headfake, or he's recently been hired by any of the major shareholders to help them liquidate.  Blackrock and the Gov't of Norway come to mind...  They could sure use some buyside volume as they liquidate right about now.

 

 

Sun, 06/13/2010 - 04:05 | 410340 Rick Blaine
Rick Blaine's picture

All I had to read was the title...

You had me with the reference to quantum mechanics.

Sun, 06/13/2010 - 04:47 | 410355 Oh regional Indian
Oh regional Indian's picture

Priceless exemplar of how far "markets" are removed from "reality".

Actually not priceless, without price. Aprice (my coinage, Au at that).

I'm from the school of thought that says that Deepwater Horizon spells the end of the industrial age as we know it. It's extremely short-sighted to see this as BP's problem alone. Or America's problem alone.

1. We live in a hugely inter-connected world. Such an event, a seminal one, will ripple around in every facet of our lives. If they nuke it, it will wave around. Surf's up. Serf's down.

2. Every age/era has it's end. If it did not, we'd be living roman lives. Evolution and re-evolution are built on the de-construction of existing paradigms. The oil driven paradigm we are all so comfortably used to it now at end. End's of ages are not binary events, they are more like damped oscillations. We are at the whimpering end of the current oscillation.

3. It's not about peak oil production. Abiotic Oil is a very plausible alternate. I for one believe it and have studied it. Paradoxically, Peak oil is upon us. The peak though, is the clash of production stagnation with hugely in-efficient consumption. SUV's in America and the gas guzzling war-machine are the eye-sores that underline said in-efficiency.

The road ahead is not crystal clear, but those with eyes to see can tell which fork to take. Humanity as we know it will not survive this. To expect it will is to believe in chimeras and mirages and the comforting croon of mother culture in our collective ears, telling us that is's all going to be all right because it always has been.

For a no-holds-barred de-construction of the industrial age, please visit

http://aadivaahan.wordpress.com

Ruthless truth-telling, uncomfortable for most.

Sun, 06/13/2010 - 05:25 | 410371 Grand Supercycle
Sun, 06/13/2010 - 08:04 | 410409 37FullHedge
37FullHedge's picture

Bp makes about $20bn profit a year its also at the moment trading below book value, They are cheap, The big question is what will the bill come to regarding this debacle? I havnt a clue but a guess of $50bn which is a lot of money maybe a good start, This $50bn wouldnt need to be all payed this year it would be over decades maybe 10 this year then around 5 a year for several years, Bp looks a good buy to me looking at the math, In my view corruption with the US government looks possible, So lets say anoher connected big oil company wants to take over bp below book value the kind of MSM reporting and ignoring the rule of law is just doctors orders to beat down the stock price maybe below half they are now then a take over offer at about todays price should go through, When the rule of law is broken who would do business with the US?

Sun, 06/13/2010 - 13:37 | 410641 FEDbuster
FEDbuster's picture

Besides not having a "rule of law" anymore, we are counterfeiting like crazy, too.

Sun, 06/13/2010 - 15:17 | 410741 Hephasteus
Hephasteus's picture

There's 2 1/2 olympic sized swimming pools worth of gold on the planet and they are increasing the number of storage vaults as many vaults declare that they are "FULL". Yes I laughed. I laughed hard.

http://www.gata.org/node/8730

Sun, 06/13/2010 - 20:13 | 411359 mule65
mule65's picture

Ben will find a way to print gold too.

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