BP is the ultimate culprit of the oil spill and it should pay for the disaster, say the people living at the coast of Mexican Gulf. There are still many unanswered questions about the long-term impact of the spill, including how it has affected the environment and natural habitats of the Gulf as well as whether residents of the area will be able to return to their jobs and livelihoods now that the leak has been capped. US government officials say that, even after the oil well is permanently sealed, workers will still have a lot to do, including the removal of around 20 million feet (6.1 million metres) of containment boom. “I would characterize this as the first 100 days. There’s a lot of work in front of us,” said Rear Admiral Paul Zukunft of the US Coast Guard. Meanwhile BP is trying the ‘Static Kill’ to stop the oil from the well. This process involves filling the well with the mixture of mud and cement.
BP has had very consistent growth record for years. It reported Earnings (EBIT) of $22.1 Billion in FY2009. The earnings for 2008 and 2007 were $31.2 Billion and $28.89 Billion. But the legacy of consistency has ended with the worst environmental disaster by mankind in the history. BP has set aside $32.2 Billion to pay the losses for oil spill. BP has $20 Billion in reserve but plans to raise more money through debt.
Cost of cleaning up is still not sure. According to IEA 2.3 to 4.5 million barrel of oil has spilled and cost has risen to $100 million per day. BP has said that it was ready pay for all type losses of the Mexican Gulf like tourism, environmental, health, etc. BP says it has set up 36 claim offices and set a claim team of 1600 people. BP has received 133000 claims till now and paid $256 million, as per last posting on their website. It will take around month and half before it pays back all the claims. BP has to face around 200 different law suits filed against it. BP shares are down almost 40% from 52 week high at $38.47. P/E ratio around 7.4 which looks very cheap but the share prices of BP will remain under pressure in days to come and BP shares may see a period of consolidation which may last for few years as BP goes to debt market to fulfil the need for cash. This may be the reason why investors are shying away from BP shares.
