According to Google finance BP stock analysis, BP had an operating margin of 10.74% in 2009. In 2010 BP operating margin was 12.91%. BP Net profit margin for the same period was 6.81% in 2009 and 8.32% in 2010. BP itself admits, It is hard to predict BP operating margins because they are affected by
With BP Oil spill on the gulf of Mexico in the news 24-7, all that negative news vibe has had a negative impact on BP stock. Since the crisis begun BP stock holder have lost 80 Billion dollars of market value. BP is facing lawsuits and cost of clean up. There is growing fear that the cost might be so high such that BP could be driven to the ground. The CEO has denied the possibility of going under, insisting BP finances are strong enough to withstand the current crisis. After looking at BP finances I agree with the CEO. Credit Suisse Group AG estimated the total cost of the clean up may reach $37 billion. According to BP 2009 results, BP balance sheet was like this:- Cash equivalents – 8.3 billion dollars Total Assets – 236 billion BP Balance sheet analysis Lets assume BP final bill is 37 billion dollars as estimated by credit Suisse, BP has a two options to pay this bill.
BP has high value assets spread all over the world. BP can sell off some of these assets to raise the money it needs. In it’s balance sheet there is an item called long term investments, which is valued at 37 billion, this alone can be enough to offset the clean up bill. With the price of oil projected to remain high, BP will continue to generate robust revenue. They can issue new debt based on projected revenue. Unless the cost of clean up sky rockets, BP should withstand the Gulf of Mexico crisis |
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