It finally happened.
Yesterday, BP (NYSE:BP) announced that it would suspend its dividend for the
remainder of 2010. After that, it will probably depend on how much the oil
spill costs as to whether, and at what rate, the dividend is reinstated.
Cost estimates for the spill
are rising. One analyst was out with a $63 billion estimate. That’s based on
the $7,942 a barrel Exxon paid for clean up and fines for the Valdez spill. To put things in perspective, the Valdez leaked 257,000 barrels of oil. BP’s Gulf of Mexico spill is expected to reach 5.3 million barrels.
BP has annual cash flow
around $30 billion. It will also have to lower spending and sell off some
assets. And it will hit the bond market to raise cash.
BP will be able to foot the
bill for the Gulf mess. But what shape will the company be in afterwards? It
reminds me of the industrial companies that were saddled with asbestos
litigation. Or even the tobacco industry after judgments against them were
These companies survived,
but they didn’t really thrive. And many were either acquired or went through
some kind of restructuring. I’d expect these options are in the table for BP.
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Spain sold 3.5 billion euro in bonds yesterday. That was
the maximum allowed in the sale. But interestingly, the 10-year bonds fetched a
4.86% interest rate, which was less than other 10-year Spanish bonds traded for
the day before.
That’s surprisingly good
news, and it shows that investors are not as concerned about Spanish debt
problems as they are about Greece. The news also helped the euro rally.
Bloomberg shows that the
euro is now at 1.23 against the U.S. dollar, up from 1.19. That’s a big move
for a currency.
As you know, I’ve been
looking for a euro rally to help U.S. stocks. And that’s what’s happening.
TradeMaster Daily Stock Alerts‘ Jason Cimpl called a bottom
for the euro at 1.20 and got his readers into several upside positions. One of
them put up a 50% gain in two days. And it looks like this stock may move even
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