Thursday, July 9, 2015

BP’s spill deal is ‘catalyst’ for acquirers as uncertainty ends

BP’s spill deal is ‘catalyst’ for acquirers as uncertainty ends: "BP’s $18.7 billion U.S. legal settlement is being cheered by investors and analysts as it ends five years of financial uncertainty. It also makes the British oil producer a more attractive takeover target. Potential buyers, held back by unquantifiable liabilities related to the company’s 2010 Gulf of Mexico spill, may find a slimmed-down BP more appealing and digestible. “The market is looking at that,” said Ahmed Ben Salem, a Paris-based analyst with Oddo & Cie., who has a neutral recommendation on BP. “This could act as the catalyst because there’s more clarity now.” The five years of battling the consequences of the worst oil spill in U.S. history has seen BP shed a third of its market value and assets, cutting production by about 1 MMbopd. It could take CEO Bob Dudley years to restore the company’s pre-spill financial performance, giving potential acquirers a window of opportunity. BP climbed as much as 1.8% in London trading after advancing 4.4% on Thursday, when the company reached an agreement to pay a record amount to settle all federal and state claims from the oil spill that spewed thousands of barrels of crude into the Gulf of Mexico and along the coasts of five states. The settlement forced BP to raise it’s total payout budget to $53.8 billion. Even that may not be enough. Defenses Strengthened The settlement didn’t cover some businesses and residents in large swaths of Texas and Florida, who still demand billions. It also didn’t include shareholders or investors blaming BP for the U.S. administration’s moratorium on deepwater drilling in the Gulf after the spill. Still, BP’s biggest threats are now gone. The company stepped up its defenses against an opportunistic takeover earlier this year, and war-gamed strategies with advisers from firms including Morgan Stanley, according to people familiar with the situation. A buyer will also have to convince the U.K. government, which told BP in the wake of Shell’s acquisition of BG Group that it would oppose the acquisition of the oil producer by a foreign company. A BP spokesman declined to comment on the company being a likely acquisition target after the U.S, legal settlement. A slimmed down BP is also an attraction for potential buyers because it has the lowest enterprise value relative to its daily oil and gas production of any of the six largest U.S. and European energy producers. Based on the current share price, the ratio is less than half that of Exxon Mobil Corp."

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