BP CEO Considering Cutting Q2 Dividend As Oil Spill And Liability Estimates Double, Goldman Not Exuberant
by ilene - June 11th, 2010 10:57 am
BP CEO Considering Cutting Q2 Dividend As Oil Spill And Liability Estimates Double, Goldman Not Exuberant
Courtesy of Tyler Durden, at Zero Hedge
Those recently popular trades to hedge BP dividends using options to create synthetic BP stock may prove prescient. The WSJ is reporting that the firm is now "considering cutting or deferring its second quarter dividend." The dividend is due to be announced on July 27, and BP’s board may cut it altogether, defer it, or pay all or part in scrip, effectively an IOU to investors, Hayward was quoted as saying." The news comes as Reuters announces that the daily flow rate from the spill is actually double previous estimates: "News that the flow rate may be as high 40,000 barrels (1.68 million gallons/6.36 million liters) per day — twice as much as previously thought — came after the U.S. market closed on Thursday." This is very bad news as it effectively doubles any accrued fines that the firm will ultimately have to pay: the new liability estimate now may be as high as $80 billion! And true to form, an administration official is there to pour some more fuel in the fire: "White House adviser David Axelrod dismissed complaints from BP about the U.S. government’s pressure, saying in an interview Hayward should “spend less time on hyperbole, and a lot more time on trying to solve the problem,” according to the Journal." In other news, in a research note released yesterday, Goldman’s analyst della Vigna expressed a muted enthusiasm for the stock, nothing compared to JPM rabid support for BP stock at these levels.
From Goldman:
BP shares have fallen 12% this week, due to increased pressure on management from the US administration, however no material negative news came through in terms of the size or potential cost of the GoM spill. Additionally the riser cap is in place and appears to be capturing a significant amount of oil. BP shares have now fallen 42% since the accident, underperforming European integrated oils by 23%. This implies that the market is discounting c.US$33 bn of post-tax damages from the spill, equivalent to US$40-50 bn on a pre-tax basis, which is in the upper end of our estimated liability range. Given uncertainties remain, we still see superior risk/reward in Shell and Statoil, both
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Rumour: BP To Cut Its Dividend Next Week, and Yet Another Goldman Sachs Stock Scandal
by ilene - June 9th, 2010 4:38 pm
Rumour: BP To Cut Its Dividend Next Week, and Yet Another Goldman Sachs Stock Scandal
Courtesy of JESSE’S CAFÉ AMÉRICAIN
This is making the rounds as a rumour, but it has credibility, and I have been expecting it as they need to set aside some serious reserves for litigation and damages caused.
The company is in deep trouble, and the CEO is making all the classic errors we learned not to do in the crisis management courses in business school.
The rumour is so widespread that I am sure it will make the wires somewhere and I will look for it.
I do not expect BP to declare bankruptcy as this story suggests, although it would be an interestingly foul gambit to try and avoid its liabilities.
British Petroleum had been at the heart of darkness many years ago, as in the example of the Iranian coup d’etat of 1953 and imprisonment of Iran’s democratically elected leader Mohammad Mosaddegh, followed by over twenty years of tyranny and torture. Some think this is what had inspired Eisenhower’s parting words about the Anglo-American military-industrial complex.
Although through aggressive use of public relations had improved its image, BP has long been noted by investigative reporters and environmentalists as a bad boy among the corporate multinationals, preferring to spend money on PR, politicians, and regulators rather than planning and safety. BP: Slick Operator and BP’s Other Spill by Greg Palast for example, and those radicals at the Seattle Times: BP’s Trail of Accidents and Scandals Lead to Alaska. When Sarah Palin, former governor of Alaska winks and says "I’m your gal," she just might not be winking at you, chump change.
I thought it was interesting that they bought the search term "oil spill" from Google to better direct the flow of information from the public.
And then of course there is the issue of insider selling that occurred prior to the more complete release of the extent of the Gulf oil leak disaster involving BP executives and former executives, and of course Goldman Sachs. Gulf Oil Spill to Drag Goldman Sachs into Trading Scandal?
This is not to say that all corporations are corrupt all the time, not at all. But neither are they naturally good, all the time. It underscores the need for regulation, and investigations into the type of corruption which was apparently widespread in the…
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Qualcomm Tries to Woo Investors with Massive Buyback and Dividend Hike
by ilene - March 3rd, 2010 11:15 am
Qualcomm Tries to Woo Investors with Massive Buyback and Dividend Hike
Courtesy of Ockham Research
San Diego-based technology giant Qualcomm (QCOM) has been in a steady downtrend since the beginning of 2010 falling nearly 30% from the high point in January. Much of the decline was in response to a weaker than expected revenue outlook and expected margin pressure for the year ahead, even though the company reiterated their earnings guidance shares fell more than 14% on that day. Today, the stock continued its now 7 day consecutive slide, with the technology sector leading the market higher, QCOM fell by another 3%. This is not the sort of performance one would expect from a company that is deeply tied to one of the market’s hot sectors, with a market leading position in producing computer chips for mobile devices.
Desperate for some good news, management has taken action to combat the declines; they announced a 12% increase to quarterly dividends as well as authorization of a $3 billion share repurchase. The new quarterly dividend of $.19 will be effective on payments after March 28th, and the $.76 annual payout implies a 2.1% yield. Also in the press release, the company’s trumpeted that it has returned $12.6 billion to shareholders dating back to 2003, which is certainly commendable. However, the share repurchase comes with no expiration, so they get the benefit of the good press with no implied time-table to spend the cash should better uses for capital arise.
These shareholder-friendly moves have sent shares higher in after hours trading, but will this be the silver bullet that will turn QCOM stock around? Analysts and investors have been scared off by falling average unit selling prices on some of their products, but we think those concerns at this point have been nearly priced in. While there still may be some further downside, we think the value has become attractive following the pressure the shares have been under.
As of the beginning of this week, we rated QCOM as Fairly Valued, but was very close to the threshold to upgrade it. Any further decline in price or improvement in fundamentals may be enough to push it to Undervalued, and the dividend increase will clearly be a positive fundamental factor. In addition, QCOM’s historical price-to-sales has ranged from 6.8x to 11.6x, but the current metric is only 5.8x. This company has lowered…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site