(Click to enlarge).
That’s the corporate structure of BP, according to Citigroup, who supposedly went to the trouble of flow-charting the oil firm in response to client enquiries.
Understandably, given the recent rhetoric from President Obama, they want to know whether BP could firewall its US business.
And the answer to that question is that it would be very difficult, if not impossible.
The reason is that BP American Production Company (that’s one of the red boxes half way down the graphic) is the primary subsidiary involved into oil and gas production and transportation in the US, Gulf of Mexcio and other parts of the world, not to mention a number of BP’s other international assets.
Based on discussions with our fixed income group and analysis of the various subsidiaries it appears that BP would likely struggle to ring fence the North American operations, given asset ownership and credit guarantees. In the absence of rejigging asset domicile many non-US assets could also be stranded in the US if the company attempted to ‘pull up the draw bridge’.
BP America Production Company appears to be the primary subsidiary involved in oil and gas production and transportation operations in the continental US, Gulf of Mexico and also other parts of the world. This entity also frequently signs and pays for leases in the onshore US based on US state production filings. The credit rating on this subsidiary appears to be tied to the parent BP PLC, which suggests the parent is a guarantor for BP America.
The US subsidiaries also appear to be the domicile for many of BP’s international assets in, for example, Latin America, Trinidad and Tobago and Angola. BP Energy Company, Amoco International Petroleum Company, BP Exploration & Production and Amoco Caspian Sea Petroleum Company are major subsidiaries within BP America that we estimate hold not only much of the US production base but other international operations including much of BP’s assets in South America.
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Meanwhile, Friday’s dead cat bounce in the BP share price is providing to be just that.
The price in action in BP just after 15.000 (BST) on Monday.
Some traders were pinning the fall on this report from Bloomberg:
BP Plc may lose control of its U.S. oil and natural gas wells and be barred from doing business with the federal government as punishment for the worst oil spill in U.S. history, industry and regulatory analysts said.
The U.S. may revoke BP’s status as operator of producing wells in the Gulf of Mexico, such as Thunder Horse, or of leases at Prudhoe Bay, said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC, a Houston investment bank.
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And here, via Morgan Stanley, is a handy ‘week ahead’ for BP:
1) Monday – BP board meeting scheduled, focus on the dividend. Recent reports suggest a compromise solution could consist of a share-based payment (rather than cash) in conjunction with the creation of an escrow account.
2) Monday/Tuesday – President Obama to visit the US states most impacted by Macondo oil spill. Post the trip, the President is expected to formally address the nation tomorrow night, during which we expect further comments on the response effort.
3) Tuesday – CEOs of ExxonMobil, Shell, Chevron and ConocoPhillips are expected to testify, in front of a subcommittee of the House energy and commerce committee, that using ‘current best practices’ incidents such as the Macondo spill are preventable
4) Wednesday – BP Chairman Carl-Henric Svanberg to meet President Obama at the White House. The focus will likely be on the creation of a BP-funded escrow account for a third-party administered claims process.
5) Thursday – BP CEO Tony Hayward will appear before a House of Representatives subcommittee to testify about the GoM oil spill.
(FT Alphaville may live blog 3 & 5, so stay tuned).
Related links:
Svanberg under scrutiny at BP – FT
BP short interest, other facts and stuff – FT Alphaville
Beyond patriotism – FT Alphaville
The ‘Sinofication of BP’: Thinking the unthinkable – FT Alphaville