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Breakingviews

BP at the mercy of higher taxes, Rosneft & oil spill costs

Tuesday, July 30, 2013 - 03:40

July 30 - Higher taxes, a lower-than-expected contribution from Rosneft and mounting compensation claims hit BP's Q2. Breakingviews argues the derisory valuation will be hard to correct.

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So high taxes are lower than expected contribution from rosneft and mounting compensation claims -- hitting BP'S_Q. two numbers. Brought his breaking news Kevin Allison joins me now this year. Any processor so. Well if you. Get the parts of the business that BP can really control that there are few positives in the results today. Upstream production was improving their downstream businesses benefited from big refinery adding some new capacities them. The problem with BP isn't so much what it can control what it can't control. And we've seen its tax -- rose because of some currency effects it's got 820% stake in rosneft which now accounts for 11% of its market cap. That wasn't performing quite -- analysts thought it would. Speaking it was the that is what why did recommends that much lower than than analysts had expected. Well I think that analysts and BP to be honest are still trying to get -- a feel for how to do. Analyze and forecast throughout snaps numbers is the problem the BP hasn't Russia is that. It swapped 50% of a joint venture that was quite commercial and quite dynamic with. 20% of rosneft which is. For all its. Good points is a kind of lumbering state owned companies so they just don't have enough experience that with a -- numbers are quite aware they're going to come in now your your focus is on. On valuation he recorded it and -- to rise revaluation. What what do you look at what's left in the spill fund with some 2300 1000000 dollars I am and you hear that the company says that when -- strong. It's coming out of the process. Right one which in essence and well. You invest not just for what what kind of problems do they -- -- company's outlook is but also for the how expensive the shares are and if you look at the shares. Today the trading about a 40% discount to the rest of the integrated oil companies and that's a huge discount that's observers are multiple. The problem is that for this multiple three -- you have to have some confidence that. When management tries to pull the levers of the business that they'll actually get results and I think that the risk of BP is that. The aftermath of this oil spill from having to shrink the company dramatically with them wandering into the swamp of US litigation. And with them also swapping their Russian business for huge stake in -- which they don't have direct control over. Has left them fundamentally with less control over the businesses like they're flying an airplane should without hydraulic -- spoken to -- this morning. I have been you have spoken a little bit with accompanying we have a press conference coming up later today with Bob Dudley it's gonna kick off soon. And welcome -- coming he's he's finally come I think if I don't round this morning talking anyway I think that the mood on Dudley is that. When he came into BP the plane is crashing into the mountain his master avert disaster. I think now the issue is. Can he get -- -- the operation back on solid footing and and again the argument is Yassin he's doing what he can. But he's fundamentally constrained by the fact that the PP. Only has so much influence over how the litigation turns out they've been. Challenging the way that they arbitration -- have been proceeding in the courts they can try to influence rosneft at the margins that got seats on the board but but but really. BP's -- is less in its own control and it was three years ago before this oil spill. Given many thanks to Matt -- and Allison from -- breaking news a Smart tennis heading inside what's our US bringing you show. That's on every day total thirties and 1730 GMT it's condom on of course. -- -- -- --

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BP at the mercy of higher taxes, Rosneft & oil spill costs

Tuesday, July 30, 2013 - 03:40

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