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[ 2010-06-12 ]

Personal Investor: BP mess proves need to diversify risk
By Robert Cole
London (UK) – 12 June 2010 – The Times - Trendsetters among
the UK retail investment community would have us believe
that BP is all the rage and its shares are quite simply the
only thing to be buying this season. Yes, it is in dire
straits because of the seemingly uncontrollable gusher in
the Gulf, but with 40 per cent wiped off the value since the
start of April, shares in what was the largest London quoted
company must, so the theory goes, be a bargain. They must,
surely, bounce back, say the faithful.

Having been hammered, again, for most of the week, shares in
the embattled oil company finally showed some signs of
recovery. They rose 8 per cent yesterday. Numbers released
by Barclays Stockbrokers suggest that buyers of BP accounted
for 14 per cent of all trades executed by the broker one day
last week.

Analysts and institutional investors talk about the
financial health of the company and its ability to fund all
but the worst-case clean-up scenarios.

Yes, the dividend may disappear, and maybe it ought to go as
a signal of shareholders’ willingness to bear the pain (as
was argued in this space six weeks ago) and to preserve
their own long-term interests. But BP has enough cash, as
things stand, to finance the clean-up and pay the dividend.

Meanwhile, over in Washington, all the rage is being
directed at the oil company that it suits President Obama to
think of as: a) British, and b) entirely responsible for the
environmental disaster that seems only to get worse.

All the rage? UK investors and US policymakers are in acute
danger of getting it quite wrong.

First off, it is a misconception to think of BP as being
British. It is, in as much as it has a London quote for its
shares and has its headquarters here. Its hapless chief
executive, Tony Hayward, was born and bred in the Home
Counties and is almost unmistakeably limey. BP has plenty of
historical links over here, too, but it is quite a long time
since it changed its name from British Petroleum to BP
(1998) and inch-thick dust lies on those who remember it
answering to the name Anglo-Iranian, or even Anglo-Persian.

But these are minor matters. BP, in terms of employees,
investors and assets, is at least as much American as
British, if not more so. Just as surely as US beaches and
wildlife are now being suffocated, it is US citizens
employed directly and indirectly by BP who will be among
those to suffer long-term damage. US access to energy under
or near its own turf will also be damaged, as will the US
tax revenues that could have swelled the federal and local
treasuries.

The nonsense of the mess that no one seems capable of
bringing under control was illustrated on Wednesday when Ken
Salazar, the US Interior Department Secretary, said that BP
ought to be made to pay for the lost wages of oil services
workers laid off by the offshore drilling ban imposed by the
US authorities. Never mind that US authorities might feel
some responsibility for lax regulation of offshore drilling.
How about pooling energy and ideas in the name of staunching
the leak as constructively and quickly as possible?

US officials, up to and including the President, who appears
to be consumed by a desire to absolve himself from any stain
of guilt, are wrong to aim all their wrath at BP. By
suggesting that Mr Hayward is unfit to run BP, meanwhile, he
has sat as judge and jury on the career of a man beset by
misfortune, and bad press.

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