This page has been archived and commenting is disabled.
Is it Time to Buy BP?
When I considered making an investment in a limited partnership in an offshore well to be sunk by Transocean (RIG) in the late nineties, I was scared off by a 1979 incident that my research turned up. An inexperienced PEMEX, Mexico’s state owned production company, suffered a blow out at their Ixtoc-1 well during a drill bit change in only 160 feet of water. The rig sank, 63 workers were injured, and the mother of all spills commenced. PEMEX was only able to plug the runaway well after drilling two adjacent relief wells in ten months, but not before 3.3 million barrels of oil poured into the Gulf.
While the environmental damage was widespread, the oil dissipated fairly quickly because of its location--south of the Tropic of Cancer. Since crude has a chemically volatile nature (that’s why it makes your car go), the rate of degradation doubles with every 10 degree centigrade rise in temperatures. With BP’s first relief well’s completion due in August, it looks like the total spill could match that seen in 1979.
Living in California, I admit to being a card carrying environmentalist, but even I can recognize when the impact of this disaster is being vastly exaggerated. This is all relevant for investors when it comes to considering an investment in BP or RIG.
The worst case estimates for the troubled oil major’s liability now stands at $40 billion, but with the shares now down from $60 to $29, it has lost $90 billion in market capitalization. Is that too much? Is the extra $50 billion purely the result of media hyped emotion? Count on a mega rally in the entire sector, and the market as a whole, the day they finally cap this thing. For a company that is now selling at a PE multiple of 4.5, which generates $30 billion a year in cash flow, there is a lot of room for error. BP is also a ripe takeover target at this valuation, presumable by another firm with a very big legal department.
The lower risk play here is to buy BP’s 5.25% 2013 notes, which this morning were yielding an enticing 8.5%, putting it well into junk territory. That way if the firm does go bankrupt, at least you are a senior creditor.
By the way, those who took my advice to buy Transocean (RIG) at $52 are now up 5% on the trade. But it’s probably the hardest 5% you ever made. The addition of the Swiss based company’s shares to that country’s stock index created a temporary boost as funds loaded up to track their benchmark.
You didn’t know that denizen of the Louisiana bayous ate cheese fondue for dinner? RIG was one of many US companies that fled overseas many years ago to escape US taxes. Of course, the way to make 5% is definitely not to lose 21% first. The entire BP story is generating more tape bombs than any other in recent history. So if the current is too strong for you and the pool too deep, here is your chance to bail out. Stock prices don’t have much to do with fundamentals these days, anyway. Of course, I still think the stock is a steal here. But for many it will be better to troll less troubled waters.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
- advertisements -
It’s a interesting news,i like it.Additionally,wellcome to my website prettyboots.org ,here are so many UGGS On Sale such as:UGG Elsey wedge|UGG Elsey wedge black|UGG Elsey wedge chestnut|UGG Elsey wedge espresso|UGG Langley|UGG Langley black|UGG Langley chestnut|UGG Lo Pro Button|UGG Lo Pro Button black|UGG Lo Pro Button blue|UGG Lo Pro Button cream|UGG Mayfaire|UGG Mayfaire black|UGG Mayfaire chestnut|UGG Mayfaire chocolate|UGG Mayfaire sand|UGG Mayfaire red|UGG Nightfall|UGG Nightfall black|UGG Nightfall chestnut|UGG Nightfall chocolate|UGG Nightfall sand|UGG Sundance II|UGG Sundance II black|UGG Sundance II chestnut|UGG Sundance II chocolate|UGG Sundance II sand|UGG Ultimate Bind|UGG Ultimate Bind black|UGG Ultimate Bind chestnut|UGG Ultimate Bind chocolate|UGG Ultimate Bind sand|UGG Ultra Short|UGG Ultra Short chocolate|UGG Ultra Short sand|UGG Ultra Short black|UGG Ultra Tall|UGG Ultra Tall chestnut|UGG Ultra Tall sand|UGG Ultra Tall balck|UGG Ultra Tall chocolate|UGG Suede|UGG Suede black|UGG Suede chestnut|UGG Suede sand|UGG upside|UGG upside black|UGG upside chestnut|UGG upside mocha|UGG Roxy Tall|UGG Roxy Tall black|UGG Roxy Tall chestnut|UGG Roxy Tall chocolate|UGG Roxy Tall sand|UGG seline|UGG seline black|UGG seline chestnut|UGG Corinth Boots|UGG Liberty|UGG Liberty black|UGG Liberty cigar|UGG Highkoo|UGG Highkoo amber brown|UGG Highkoo espresso|UGG Highkoo grey|UGG Highkoo black|UGG Knightsbridge|UGG Knightsbridge black|UGG Knightsbridge chestnut|UGG Knightsbridge grey|UGG Knightsbridge sand|UGG Knightsbridge chocolate|UGG Adirondack|UGG Adirondack brown|UGG Adirondack chocolate|UGG Suburb Crochet|UGG Suburb Crochet black|UGG Suburb Crochet chestnut|UGG Suburb Crochet chocolate|UGG Suburb Crochet grey|UGG Suburb Crochet white|UGG Kensington|UGG Kensington black|UGG Kensington chestnut|UGG Roseberry|UGG Roseberry black|UGG Roseberry sand|UGG Gaviota|UGG Gaviota black|UGG Gaviota chestnut|UGG Gaviota chocolate|UGG Desoto|UGG Desoto black|UGG Desoto chestnut|UGG Desoto chocolate|UGG Brookfield Tall|UGG Brookfield Tall black|UGG Brookfield Tall chocolate|UGG Gissella|UGG Gissella black|UGG Gissella chestnut|UGG Gissella espresso|UGG Payton|UGG Payton black|UGG Payton chestnut|UGG Payton red|UGG Bailey Button Triplet|UGG Bailey Button Triplet black|UGG Bailey Button Triplet chestnut|UGG Bailey Button Triplet chocolate|UGG Bailey Button Triplet grey|UGG Bailey Button Triplet sand|There are so much style of cheap uggs for sale ,so once you go to my website you will be very surprise.
Here's a little something interesting. This link has a video on it that compares the BP oil spill to a spill that occurred in 1979 in the Gulf of Mexico. It is earily similar.
http://solari.com/blog/?p=7684
I've been watching the remarks by Mike Stathis regarding BP lately.
He has a real drive to teach people how to think about things rather than tell them what to think. You may want to check out these links:
http://www.avaresearch.com/article_details-565.html
http://www.avaresearch.com/article_details-566.html
http://www.avaresearch.com/article_details-567.html
BP will go bankrupt and reorganize if the claims start heading north of 30 Billion. Stock equity holders will be wiped out. So unless you are out of your fu*king mind - do not buy this stock, RIG, HAL or Anadarko till the smoke has cleared!
Dear MHFT,
What about that yen call a few months back, 95, then 100 ,then 120?
Anyone who bought the stock this morning on your recommendation would have lost 4.5% of his money today alone. I guess tomorrow would be a good day to average down.
This guy is full of hot air, Mitch. This is the last post of his I am clicking on.
I try to stay openminded and at minimum read what he has to say, but his cred has been slipping with me. Thanks for your comments.
I heard the tag placed on a barrel was $3,000. With that known, I can see the speculators jump from 35k to 60k barrels per day, hell, why not make it 100k barrels leaking per day, a million?
MHFT,
If I want to gamble, I can go to Vegas and play Blackjack or Poker. Drinks are free and I can stare at cocktail waitresses as much as I want. That is a lot more fun that playing BP.
This hurricane season forecasts 6 hurricanes.
What happens to BP stock price if even 1/2 of a hurricane hits the spill?
MHFT strategy in two easy parts: 1. Pump 2. Dump
Vastly exaggerated my ass.
safe trade: buy BP OCT 45 puts, sell BP OCT 31 puts. Collect the time value.
How the hell can you collect the time value of buying $15 in the money puts and selling near ATM puts trading at $5--that's a net cost of $10!
..not to mention the Vol. traders will have pushed the $31 strike so low in Vol terms he'll be eating the wings for b-fast...
ahhh ... have you ever traded options B4 ...??? (...obviously not) (buy ITM sell ATM and collect TVP...??? what a fuckin' trade!) anythime you want to trade ... let ME know first .... when it expires on your long strike, I hope you enjoy...
Collect theta by buying oct40 puts and selling jan?
Jesus! MHFT!! --- you got More distressed length to unload???... is there anything you ain't long and wrong about??? (..some trader)
"The worst case estimates for the troubled oil major’s liability now stands at $40 billion"
Why?
It's 27 Billion just on penalties
________
FEDERAL WATER POLLUTION CONTROL ACT
[As Amended Through Pub.L. 110-288, July 29, 2008]
"GROSS NEGLIGENCE—In any case in which a violation
of paragraph (3) was the result of gross negligence or willful
misconduct of a person described in subparagraph (A), the
person shall be subject to a civil penalty of not less than
$100,000, and not more than $3,000 per barrel of oil or unit
of reportable quantity of hazardous substance discharged."
http://www.waterboards.ca.gov/laws_regulations/docs/fedwaterpollutioncontrolact.pdf
______
That's $3000 per barrel
150 * 60 000 * $3 000 = $27 000 000 000
Were you not saying time to buy at $44?
Quik analysis, as yet unrefuted:
BP intentionally, repeatedly understated BPD flows.
Mudlogs missing.
Fragile brittle strata seafloor.
Erosion due to top hat a real concern, thus casing truly at risk with flows thru August, assuming August is even the relief well date.
Technicians say relief wells take 4 - 7 tries for last sevral hundred feet to intersect original bore hole and casing.
$20Bil fund excludes penalties and is NOT limited.
Months to go before all the bad news is on the table.
Thus, PUTS.
Dome cap, top hat, etc.
"America's revenge" - http://order-order.com/2010/06/21/americas-revenge/
It may be worth making a small LEAP options investment that would account for the stock retracing back to $50 or so and another option for $15 and maybe even a smaller investment that would account for bankruptcy. The worst that could happen is that the stock fluctuates around $30 a share for the next 1.5 years. But if the stock goes significantly in either direction, any gains will easily wipe out the losses from your hedge.
But it seems to me that the stock is in limbo right now. The debate on this thread is the debate other investors are having right now. Is it doomed or a steal? Why not bet both ways and bet against $30 a share? Once the picture becomes clearer, I suspect the stock will begin gravitating toward either end of the spectrum. We'll see how it turns out. For what it's worth (not much), my money is where my mouth is on this one.
I've been looking at the proliferation of secondary bonds for BP, APC. They're yielding about 7.5% out to 2016 for APC, the safer of the 2 companies. I suggest all you gamblers, which is all this is, ask yourself "what if "THEY CAN'T PLUG THE WELL... EVER?"
APC has about $175mil+$1.5Billion insurance(Fed), yet it's bonds only yielding 7.5%, I would want 10%.
Nobody here knows if the casing blew out, meaning the relief wells FAIL.
http://finance.yahoo.com/q?s=BP110122C00050000
Jan11 $50 call. Load up on 'em, cheap.
Screw BP...solars baby!!!!!!!!!!!!!!
MHFT once again proves he is, after all, mad as a hatter. Can't argue non-disclosure, it's right there in his name.
BP is a gamble. Gambles don't fit into my trend following system.
Jim Rogers is on the BP bid... and he has a family to take care of.
This is off topic, but great article. Seems made for this site to analyze
http://www.bloomberg.com/news/2010-06-21/cook-a-hamburger-and-blow-up-yo...
Living in the Marcellus Shales I recommend anyone that has HBO watch Gasland tonight at 9PM Eastern.
People can light their tap water all over the place here. It's killing livestock. People are getting sick. The rivers are already low and we had a very wet winter and spring. Fracking uses 48 millions gallons of water a day in PA alone and the numbers grow every day.
This is a nightmare in the making. None of the previous states that were severely impacted (Texas, Wyoming) were agricultural states. Let's see how the crops do in the next few years with more and more methane and the chemicals Chesapeake et. al. won't reveal in the fracking process.
I would add that the purchase of XTO by Exxon has a clause--if the Clean Water Act is re-enacted for the frackers, that deal get's undone. That should tell you all you need to know about the truth of the issue.
Catch the trailer here:
http://www.youtube.com/watch?v=dZe1AeH0Qz8
I don't think I would complain about that. It sounds like they have well water with a holding tank inside their home.
Re-plumb the tank to allow for the gas to be trapped at the top of the tank. Tap the top of the holding tank and get free nat gas to run your home and car...
Ignitable tap water - http://www.youtube.com/watch?v=TEtgvwllNpg
*
Perhaps traders might be looking for BP to pop... buuuut.
The gulf will be poisoned for three generations, and who knows how to quantify that? No one, that's who.
You are betting on the come holding a 7 and 2 hand on the river.
Good luck and enjoy the lie-buffet.
If you want a trade, check out ERX. I have no reason why this thing goes volatile every day. Must be Hal. vs. Hal. 2010. Just my input and always buying in the 20's.
I recommend following this over at www.theoildrum.
The media is doing a half-and-half job with regards to reporting. Sometimes they really nail some issues and coverage is good. Sometimes they completely misinterpret facts resulting in mis-information (at best). Then there is the intentionally sensationalist crap like Simmons. Simmons has yet to produce any DATA or FACTs supporting his claims. Pretty much everything sources back to (1) people working in the gulf such as roughnecks or fisherman (2) reporters reporting from the gulf (3) BP or (3) Congress/DoE/*.gov.
The 100k+ barrels per day amount is "worst case" and assumes major failures that have not happened yet.
This is bad enough without the sensationalism.
The latest concern that really caught my eye was some reporting that up to 40% of the discharge was methane gas, which dissolves in the water to some extent. This could create huge areas where oxygen based organisms can’t survive.
My sister (former Merchant Marine Academy grad) works logistics for a marine research vessel that is equipped to actually do this type of quantification. I heard indirectly through my Mom that this vessel was mapping methane “clouds” in the gulf and found much bigger and more concentrated deposits than they thought they would find. My Mom said they would be on ?CNN? tonight at 5 or 5:30 CDT. I don’t watch TV, so I don’t absolutely recall the station, but mom said she would DVR it for me.
Cooter
Could you share with us your mom's ideas on the Euro?
LOL
lmao
BP may not go down without swinging and pointing fingers.
Just bought some CAM and NLC puts re major product liabilities.
BX GS connexions...
@MHFT:
Over the past year, I've enjoyed many of your posts . . .
But in your commentary of today, there are many material facts that are missing. In a nutshell, I've taken the other side of the BP trade, as I believe it'll easily go down to 20 within the next month or so, and maybe a lot more!!! The oil and gas pressure has been increasing, not decreasing. This is a very bad sign.
In the meantime, our wonderful government is grossly underestimating the daily oil spill (it's over 100K barrels daily!), and BP has steadfastly refused to disclose it's all important "mudlogs" . . . a review of which would reveal just how dangerous the current situation truly is.
BP is in a "race against time" as the two relief wells won't be "ready" until August. In the meantime, there is a high likelihood that the existing blowout well will completely erode. If that happens, all hell would break loose.
No.
Until the relief well caps/stops the leaks from the blowout well, the cost of the oil spills may be in trillions, not billions. Per Matt Simmons there is zero, yes zero, chance the relief well or any other action will stop the leakage of hundreds of millions of bbls of toxic oil and gas fumes from reaching the ocean surface. This may leave the GOM with near zero oxygen for marine life and cause a mass evacuation of millions from FL/MS/AL/LA as toxic benezene fumes reach onshore. Why would anyone invest in BP or any oil related company until the leak stops? The ultimate liability could be trillions of dollars, not billions with the liability touching all companies with GOM operations.
Google: gulf oil swift fox
If Mat Simmons truly believed that a toxic cloud is going to force the evacuation of the southern USA he wouldn't be shorting BP. He would be buying tinned food and moving to Canada.
He is probably moving to Santa Barbara, just like Al Gore. BTW what is legal/corporate structures employed at BP to protect its assets? Maybe the exploratory blowout well was setup in a LLC. Did BP make an Corporate guarantee to obtain MMS permits? IMO, BP will walk away from those assets available to the US legal system and protect the motherland and pensioners rather than pay open and never ending class action lawsuits.
This is a question for Oil Litigation Lawyers... and that is an easy Google search. Here is an article quoting several experienced Oil Litigation Lawyers... and they pretty much agree that BP has NO PLACE TO HIDE. There are no technicalities (like folding an LLC, going back to UK, etc) that will allow them to avoid FULL COMPENSATION. That means they are at the mercy of US politicians, baby.
http://www.businessweek.com/news/2010-06-15/bp-bankruptcy-would-offer-no...
Did I miss something, or did not BP suspend their dividend? What other reason would there be to own this company now?
It really just depends on whether the US government decides to pursue the environmental fines or not. If they do, then regardless of whether criminal negligence is proven (the lower amount of fine/barrel still appies), BP is headed for bankruptcy. I get the sense that this will probably happen, with some sort of deal made during the bankruptcy to drastically reduce that fine total, and they come out of bankruptcy with something investable to work with.
RE:
Is it time to buy Lehman?
Is it time to buy WaMu?
Is it time to buy Bears?
Is it time to by America?