By Julian Hofmann, 29 July 2010
Mr Hayward does at least have the comfort of a £1m pay-off and a £600,000 annual pension after a quarter of a century in BP's service, which is a better deal than can be said for shareholders after the half-year dividend payment remained suspended. The company has instead used the cash to fund an escrow account of $20bn to cover the immediate costs of the spill and legal claims associated with it. Despite the chaos, the company still managed to generate sales of $147bn in the half, up 30 per cent on 2009.
The immediate question is what BP sells in order to cover its costs. It has already disposed of $7bn of assets to Apache, with a further $30bn now up for grabs. The extra cash will come in handy, too. First of all, it will allow the company to reduce its net debt to its target of between $10bn-$15bn over the next 18 months, and also insures against further costs associated with the spill, as Mr Hayward admitted that the full costs could be spread over a number of years.
IC VIEW:
It is possible to feel sympathy for Tony Hayward, who inherited a self-defeatingly parsimonious approach to safety from his predecessor, the now ennobled Lord Browne of Madingley, as was noted in a US government report in 2007. But shareholders must now take a hard-nosed approach to BP's shares. Legal battles are a distinct possibility for many years, but there still might be value in a PE rating of only four. Speculative good value at 418p.
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