In the aftermath of the biggest environmental disaster in U.S. history, the Gulf of Mexico relief-well saga continues to monopolize our attention.
But here's the reality: Money problems - not the relief wells - could prove to be the undoing of BP PLC (NYSE ADR: BP). And that means the company's fate is most closely tied to its ongoing efforts to raise money by selling key assets from around the world.
BP is looking to divest $30 billion in assets during the next 18 months.Selling its assets is one way for the company to raise the money needed to cover its expected liabilities. But here's the problem: Those sales are moving right into the teeth of a new round of mergers-and-acquisitions (M&A) deals that were already taking place in the oil-and-gas sector, due to rising volatility there and the inability of some to withstand the uncertainty.
As a result of all this wheeling and dealing, the big will get bigger - and BP will get smaller. Indeed, the BP that emerges from the mess that it created should be smaller, leaner and smarter. But will that be good enough?
Oil Spill
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Is BP Dealing Away Its Future?
To understand BP's financial strategy, please read on...
Why You Should Worry About the Iran Oil Sanctions
I cut my teeth doing energy-related deals in the Soviet Union and still spend a lot of time consulting in Russia and the Caspian Sea basin. These days, my work takes me all over the globe. But the part of the world where my career began still holds the key for future oil supplies.
Especially the Caspian.
This land-locked body of water borders five countries, each having major oil-and-gas reserves.
One of those countries is Iran - the focus of the latest problem that's cropped up in the global energy sector.
And that "problem" - Iran oil sanctions - is certain to bring about an increase in the price of crude oil.
Especially the Caspian.
This land-locked body of water borders five countries, each having major oil-and-gas reserves.
One of those countries is Iran - the focus of the latest problem that's cropped up in the global energy sector.
And that "problem" - Iran oil sanctions - is certain to bring about an increase in the price of crude oil.
Two sanction-spawned catalysts will boost oil prices. To see them, read on...
Question of the Week: Readers Respond to Money Morning's BP Image Query
BP PLC (NYSE ADR: BP) last week confirmed that Robert Dudley - an American and a company insider - would be replace Tony Hayward as the company's chief executive officer in a move that's intended to improve the battered BP image.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico - the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico - the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
Special Report: New CEO Dudley Isn't the Long-Term Answer at BP, Expert Says
When readers ask me how Dr. Kent Moors could be up nearly 60% on a portfolio that he only launched July 6, I don't give them an answer.
I tell them a story.
When the BP PLC (NYSE ADR: BP) CEO-replacement saga began to unfold earlier this week, and the Money Morning news team was working the story, I contacted Dr. Moors to ask him if he knew anything about anointed successor Robert Dudley.
With that response, Dr. Moors underscored, yet again, why he's the ultimate energy-sector insider: He doesn't just know about Dudley - he actually knows him.
In fact, Dr. Moors went on to give me an analysis of the new CEO's managerial style, including Dudley's strengths and weaknesses. Dr. Moors even went as far as highlighting the elements of Dudley's managerial proclivities - and the elements of BP's strategy - that pose the biggest risks to the Big Oil company's turnaround.
For the full story on BP’s new CEO, please read on...
I tell them a story.
When the BP PLC (NYSE ADR: BP) CEO-replacement saga began to unfold earlier this week, and the Money Morning news team was working the story, I contacted Dr. Moors to ask him if he knew anything about anointed successor Robert Dudley.
With that response, Dr. Moors underscored, yet again, why he's the ultimate energy-sector insider: He doesn't just know about Dudley - he actually knows him.
In fact, Dr. Moors went on to give me an analysis of the new CEO's managerial style, including Dudley's strengths and weaknesses. Dr. Moors even went as far as highlighting the elements of Dudley's managerial proclivities - and the elements of BP's strategy - that pose the biggest risks to the Big Oil company's turnaround.
For the full story on BP’s new CEO, please read on...
Money Morning Mailbag: U.S. Drilling Ban Could Be Permanent for BP
The U.S. government's deepwater oil drilling ban, which resulted from the BP PLC (NYSE ADR: BP) Gulf oil spill, prompted some readers to question how far U.S. authority reaches regarding offshore business, and what kind of international repercussions could result.
Q: Where do international waters begin for the Gulf of Mexico? I read somewhere if we didn't drill for oil in the Gulf that China was going to do so. When you are talking international business, does U.S. President Barack Obama have the authority to shut it all down?
Q: Where do international waters begin for the Gulf of Mexico? I read somewhere if we didn't drill for oil in the Gulf that China was going to do so. When you are talking international business, does U.S. President Barack Obama have the authority to shut it all down?
- John M.
We Want to Hear From You: Will BP's Makeover Restore the Oil Giant's Image?
BP PLC (NYSE ADR: BP) confirmed Tuesday that embattled Chief Executive Officer Tony Hayward is being replaced by Robert Dudley - an American and a company insider - in a move that's intended to improve the oil giant's battered image.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must also persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico - the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must also persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico - the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
The BP Relief Wells … And the Two Nightmare Scenarios to Fear
Although the global energy sector is entering its most-promising stretch in decades - with more new technologies and more investment opportunities than ever before - I just can't seem to get away from BP PLC (NYSE ADR: BP) and its problems.
Take last Thursday, for instance. I began the day at FOX Business News, where the interviewer wanted me to explain what will happen if the BP relief wells fail. Then I spent an hour as the guest on a radio talk show from Johannesburg, South Africa, detailing what options are available to BP. Later still, I served as a consultant to a Wall Street investment crew - via conference call - once again on the status of the BP relief wells.
The BP relief wells are right now the dominant topic on everyone's mind. But there are two potential scenarios - of "nightmare proportions" - that investors need to know about.
Let me explain...
Take last Thursday, for instance. I began the day at FOX Business News, where the interviewer wanted me to explain what will happen if the BP relief wells fail. Then I spent an hour as the guest on a radio talk show from Johannesburg, South Africa, detailing what options are available to BP. Later still, I served as a consultant to a Wall Street investment crew - via conference call - once again on the status of the BP relief wells.
The BP relief wells are right now the dominant topic on everyone's mind. But there are two potential scenarios - of "nightmare proportions" - that investors need to know about.
Let me explain...
To understand the possible nightmares that BP faces in the months to come, please read on...
The 'New' Energy Sector: Windfall Profits for Investors, Energy Independence for the U.S. Economy
The BP PLC (NYSE ADR: BP) oil spill has been a wakeup call for energy-sector regulators.
But it's been an even bigger wakeup call for investors.
Years from now, investors will look back at this period as a turning point - the start of the greatest profit opportunity of this generation. And that's not all. The post-oil-spill period will go down in history as the period during which the United States was finally able to break its dependence on foreign oil, says Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world.
Investors who understand the energy-sector shifts that are taking place "will make more money in energy investments over the next several years than in any other sector during any other period in their lifetimes," says Dr. Moors, who is also the editor of the Oil & Energy Investor newsletter. With the changes he's currently projecting, "a large measure of energy independence for the U.S. becomes possible. And I'm not just talking about a mere economic 'recovery' here. We'd be looking at a standard of living that's 60% higher, an economy expanding at 5% to 7% a year and - most important of all - a future that we could dictate."
But it's been an even bigger wakeup call for investors.
Years from now, investors will look back at this period as a turning point - the start of the greatest profit opportunity of this generation. And that's not all. The post-oil-spill period will go down in history as the period during which the United States was finally able to break its dependence on foreign oil, says Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world.
Investors who understand the energy-sector shifts that are taking place "will make more money in energy investments over the next several years than in any other sector during any other period in their lifetimes," says Dr. Moors, who is also the editor of the Oil & Energy Investor newsletter. With the changes he's currently projecting, "a large measure of energy independence for the U.S. becomes possible. And I'm not just talking about a mere economic 'recovery' here. We'd be looking at a standard of living that's 60% higher, an economy expanding at 5% to 7% a year and - most important of all - a future that we could dictate."
To understand the top trends unfolding in the new energy sector, please read on...
Free Report: The New Global Power Broker in Oil
Uganda has found oil, and lots of it. But it lacks the ability to turn crude into needed oil products, like gasoline, diesel, jet fuel, and low-sulfur heating oil. Unless it can develop a local way to process the oil coming out of the ground, it must rely upon exporting that production as raw material […]
Louisiana Judge Blocks Offshore Drilling Ban
A federal judge in Louisiana today (Tuesday) blocked a White House moratorium on offshore drilling in the Gulf of Mexico, MarketWatch reported. The White House said it would appeal the decision immediately, according to reports.
Louisiana Gov. Bobby Jindal and state Attorney General Buddy Caldwell filed papers Sunday in a New Orleans federal court petitioning for the six-month deepwater oil drilling ban be lifted in 30 days. The papers said that lifting the ban would avoid "turning an environmental disaster into an economic catastrophe."
"Even after the catastrophic events of Sept. 11, the government only shut down the airlines for three days," Caldwell said.
Louisiana Gov. Bobby Jindal and state Attorney General Buddy Caldwell filed papers Sunday in a New Orleans federal court petitioning for the six-month deepwater oil drilling ban be lifted in 30 days. The papers said that lifting the ban would avoid "turning an environmental disaster into an economic catastrophe."
"Even after the catastrophic events of Sept. 11, the government only shut down the airlines for three days," Caldwell said.
Why China's Foxconn Will Hurt the Global Economy More Than the BP Oil Spill
Before this month, chances are pretty good that you'd never even heard of Taiwan's Foxconn International Holdings (PINK ADR: FXCNY). And yet, Foxconn is one of the world's most important manufacturers.
Given that the formerly anonymous giant is now at the forefront of the zooming escalation in labor costs that's currently taking place in Mainland China - and given the enormous implications of the inflationary pressures that will result - chances are excellent that Foxconn will have a bigger effect on the world economy this year than even BP PLC (NYSE ADR: BP).
If that weren't enough, China's decision to let the yuan appreciate against the U.S. dollar will actually magnify this impact: If the Chinese currency strengthens, then the yuan-denominated wage increases will have an even-more-inflationary effect on the cost of China-made goods selling at your local Wal-Mart (NYSE: WMT).
To understand the "Foxconn Effect" - and to see how to position your investments - please read on...
Given that the formerly anonymous giant is now at the forefront of the zooming escalation in labor costs that's currently taking place in Mainland China - and given the enormous implications of the inflationary pressures that will result - chances are excellent that Foxconn will have a bigger effect on the world economy this year than even BP PLC (NYSE ADR: BP).
If that weren't enough, China's decision to let the yuan appreciate against the U.S. dollar will actually magnify this impact: If the Chinese currency strengthens, then the yuan-denominated wage increases will have an even-more-inflationary effect on the cost of China-made goods selling at your local Wal-Mart (NYSE: WMT).
To understand the "Foxconn Effect" - and to see how to position your investments - please read on...
China's CNOOC Will Ramp Up Deepwater Oil Drilling as BP's Oil Spill Kills U.S. Exploration
China's CNOOC. Ltd. (NYSE ADR: CEO) will step up its long-term deepwater oil exploration plans with a close eye on safety measures in the wake of the BP PLC (NYSE ADR: BP) Gulf oil spill that has halted U.S. deepwater drilling. The state-controlled oil company has exclusive rights to develop China's offshore resources and has […]
Marcellus Explosion-BP Spill: Both Involved This Faulty $7 Piece of Plastic
Sometimes the very smallest part of a complicated piece of equipment can bring down the entire project. The part at issue here, a thin ring of rubberized plastic, costs about $7. Yet it may be responsible for forcing the U.S. to rethink its entire domestic energy strategy. Here's what happened. Clearfield County is a rural […]
Money Morning Mailbag: BP's Post-Oil-Spill Reputation Leads Readers to Consider Socially Responsible Investing
BP PLC (NYSE ADR: BP) stock plunged 16% to hit a 14-year low in New York trading Wednesday as some investors panicked over growing liabilities and others worried about socially responsible investing.
In London trading Thursday BP fell 6.7% to 365.50 pence, its lowest closing price since January 2003 and 44% lower than the day the Deepwater Horizon rig exploded.
"The share price is political and in no way fundamental," said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. "The U.S. needs to realize it needs BP to survive to clean up the mess. Scapegoating has gone too far."
In London trading Thursday BP fell 6.7% to 365.50 pence, its lowest closing price since January 2003 and 44% lower than the day the Deepwater Horizon rig exploded.
"The share price is political and in no way fundamental," said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. "The U.S. needs to realize it needs BP to survive to clean up the mess. Scapegoating has gone too far."
Moribund Sentiment Is Jeopardizing the U.S. Stock Market
The U.S. stock market is really at a critical juncture right now.
I'm all for being optimistic at the prospect of a super-oversold condition amid rampant pessimism. But bulls need to take charge of the controls of this sputtering plane. But now that they failed to yank the stick higher before the February lows, the bottom is really in danger of falling out.
Most corrosive for the major indexes' value at present are large-cap energy and bank stocks, which have fallen 7% as a group amid a hex from the BP PLC (NYSE ADR: BP) blowout and financial regulation clampdown.
You would think that a cut in oil supply from the Gulf of Mexico would provide a strong undertow for energy, at least, but investors have been acting like industrial demand will grind to a halt in coming months.
June historically has been the second worst month of the year, after September. But after suffering through the worst May since 1940, and bearish sentiment on overdrive, it's fair to expect opportunistic investors to dive in now and take advantage of bargains.
I'm all for being optimistic at the prospect of a super-oversold condition amid rampant pessimism. But bulls need to take charge of the controls of this sputtering plane. But now that they failed to yank the stick higher before the February lows, the bottom is really in danger of falling out.
Most corrosive for the major indexes' value at present are large-cap energy and bank stocks, which have fallen 7% as a group amid a hex from the BP PLC (NYSE ADR: BP) blowout and financial regulation clampdown.
You would think that a cut in oil supply from the Gulf of Mexico would provide a strong undertow for energy, at least, but investors have been acting like industrial demand will grind to a halt in coming months.
June historically has been the second worst month of the year, after September. But after suffering through the worst May since 1940, and bearish sentiment on overdrive, it's fair to expect opportunistic investors to dive in now and take advantage of bargains.